Ecommerce is simply the process of purchasing and selling goods or services online without the buyer physically visiting you to make the purchase.
Retail NZ reports that about one in every ten retail dollars is spent online – the percentage is roughly the same in Australia and the United States – and that rate is expected to nearly double by 2030. In other words, there is a great deal of money sloshing around on the internet.
The pandemic led to the rapid growth of businesses adopting or even moving to an ecommerce strategy in order to continue dealing due to physical distancing. Despite the lifting of constraints, many businesses will now seek long-term expansion of their ecommerce capacity
Additionally, there are advantages to selling online. It’s inexpensive to be present, clients can order from anywhere, and most of the process is automated.
What types of products are you permitted to sell online?
Whichever industry you work in, there are three types of products that you may sell:
- Commoditized goods and services
- Niche items
- Tangible products
Commoditized items are those that are necessary, in great demand, or popular. They might be physical or digital things. These are goods that are required by everyone.
Commoditized items account for the biggest chunk of internet sales. Consider everything you purchase at Walmart or Amazon that is backed by a major brand – food, golf equipment, clothing, or children’s toys, for example.
Niche products are items or services that cater to a niche market or product category. Such as brands that make clothes in unique sizes from Large to 4XL.
Ecommerce, in its most basic form, is an online store that sells real physical things that are delivered to the buyer. This comprises the following types of businesses:
- developing their own brands (i.e., you have identified a gap in a specific market, and have had your own product designed and manufactured to fill this gap)
- reselling other companies’ items (i.e., you sell a variety of other brands’ products).
- creating and selling handcrafted goods (i.e., you create a small batch of custom goods).
Financial and Legal Considerations
When selling online, it is critical to understand your legal and tax duties. In New Zealand, there is no capital gains tax, which means that any profits earned from the sale of your business will be tax-free. However, depending on the form of the business you are selling, you may have additional tax and reporting duties.
For example, if you are:
- a sole trader selling your assets, GST may apply; or
- selling the shares of your company, you need to let the Companies Office know.
It is important to consult with a tax or legal specialist to guarantee seamless selling. Additionally, they can assist you in ensuring that your business is legally sound and in resolving any outstanding legal issues, such as: • ensuring that you own all assets on your balance sheet; • clearing security interests on the PPSR; • protecting your intellectual property, such as your website brands; and • securing business contracts with advertising companies and web designers.
Fees associated with selling online
Accepting online payments is not free. The companies that process the transactions charge between 1% and 4% of the purchase price.
Don’t forget to record these charges as an expense in your business accounting. Assign each charge to a single transaction if possible, so that you can determine the real profit on those transactions. This may be accomplished with online accounting software.
Offering products in online marketplaces
Additionally, you may sell on marketplaces such as TradeMe, Facebook, Amazon, or eBay. Through their websites, these companies enable you to showcase items, charge consumers, and accept payments. Of course, they earn a commission on each sale, but it is often rather tiny.
Marketplace platforms do not always compensate you immediately after a sale is completed. They may meet just once a month. Allow for delays in the movement of merchandise and the receipt of funds.