Have you heard about eCommerce or drop shipping in the news lately? If so then you’ll likely have heard how you can make money from anywhere in the world, selling products direct to consumers either holding the stock yourself or selling blind.
If you’re already getting excited then keep reading, I am based in New Zealand and own multiple eCommerce businesses myself. Today I’ll show you how to start an eCommerce business too.
Last year the NZ Herald reported on a young man who made over $800k per year selling car mounts for phones. While this is a great success story, you could easily be the next one.
There is literally millions of products to sell and billions of buyers worldwide that you can sell too. Compare that to a local store in a leafy suburb in Melbourne that might have a customer base of a few thousand.
What is eCommerce?
eCommerce is the concept of selling goods and services online to customers around the world. You’ll create a website, list products and when someone buys them you’ll either fulfil the delivery process yourself or use a third party to ship the product/s for you.
You find a supplier, buy the products, import them into New Zealand and then list them on your website. When someone buys something, you’ll fulfil the order and pocket the difference between the selling price and all your expenses.
Likely expenses will include cost of goods sold (the product cost), your website fees, credit card fees and shipping fees.
How To Know What To Sell?
One of the hardest parts about starting an eCommerce business is figuring out what to sell. While most people choose a niche they are interested in personally, it’s not always the best idea.
Take clothing for example, it’s the most popular niche for new comers but have you thought about all those different sizes you’re going to need? For men you might have four sizes but for women you could end up having six to ten sizes.
That’s per SKU, imagine having a range of 50 clothing items.
The best products to sell are one SKU, i.e. you have one product, one size fits all all, one purpose suits all. This will ensure you have lower startup capital requirements.
The next advise I can give you is to solve a problem. If you can do that, you can market your products to people who have that problem. This makes your life much easier when you’re starting out as you can use free, paid and influencer traffic.
Solve a big problem and you’re onto a winner.
Isn’t It Expensive To Create An eCommerce Store?
Gone are the days where you need to pay some geeky agency 50k to build you a website. You also don’t need to learn coding to create your own platform.
There are now cloud based solutions such as Shopify which costs $29 USD per month and offers a complete do it yourself platform for creating your very own eCommerce store.
Offering a ton of free templates and apps to customise your store further, you can really create a store in under an hour.
They even offer payment methods so you can accept credit card facilities on your website and get paid into your bank account every few days.
Some of the best apps include cart recovery so if customers return to your website you can show them their cart again. You can also add popup boxes offering coupon codes and newsletter signup forms. If you want to pay more you can even get one click upsell plugins to increase your average order value.
Is eCommerce Risky Business?
If you compare eCommerce to a retail store then you’re business is far less risky. For starters you don’t have the overheads or expenses of a retail store. You also probably won’t need to pay employees to run your business (until you grow).
You’re not tied into a long lease that could bankrupt your business when times are tough.
Your business is also online 24/7/365 and can be viewed and purchased by consumers all over the world. As long as you can accept credit card payments, your business is open for business.
However, eCommerce does have risks, especially around stock. If you buy the wrong products, they arrive damaged or simply don’t sell then you could have a huge stock writeoff at the end of the year and be stuck with products no one wants.
If you really want to minimise your risk then you should start a drop shipping store. I’ve done a guide on how to start one of these stores here, it might be a good read.
If you’re still convinced on buying your own stock, then keep reading. This monster post will help you!
Can You Make Money With eCommerce?
Journalists in New Zealand who write about these high school dropouts or stay at home mums making millions seem to have no idea how business actually works. They look at the revenue, not the actual costs of running a business.
Just because someone made a million dollars revenue, doesn’t mean they actually made any money. You’d hope they did but imagine if your costs are higher than that, you’re not actually making any money.
Remember you need to factor in your product purchase costs, shipping, import fees, import duty (if applicable). You also need to ensure you’ve got insurance (indemnity if you’re selling products that could cause injury or death), your store cost and apps plus of course your marketing budget.
The average net profit for a store is 20% of revenue so you’d be expecting to see a store making a million dollars per year getting a pre-tax profit of around $200k. This excludes paying yourself any wages. As a sole trader you could pay tax personally on this figure.
How To Start An eCommerce Business NZ
Okay so if you’re still interested and want to learn how to setup an eCommerce business then you can checkout my quick start guide below. This guide has been tailored for New Zealand residents but could be applied worldwide.
1. Setup Your Business Structure
If you’re going to start a professional eCommerce business properly then you should set yourself up as either a sole trader or company as soon as you start making more than a couple hundred dollars profit.
Personally I chose to setup a company which required a formation fee and this then allows you to open a business bank account with most kiwi banks. I opted for Bank of New Zealand and setup a cheque account, savings and credit card which provided a $2,000 credit limit.
In New Zealand the credit card isn’t as useful as other countries for free airline flights and upgrades but is a handy way to rack up points as you’ll be constantly buying stock and repaying the credit card when funds are deposited to your bank account.
You don’t need an accountant to setup an NZ company or sole trader declaration but if you do, it’s probably worth while and their fees can be your first business expenses. If you only take away one key point from this step, make sure you setup a different bank account for your business.
It will be extremely difficult to file your tax returns if your statement is full of personal purchases too and nearly impossible to find everything. Trust me, I’ve been there and done that and it wasn’t a fun process.
Benefits of having a company are the limited liability vs unlimited liability you’d be responsible for if your business goes under. Your customers will have more reassurance buying through a company than your personal name.
2. Choose To Register For GST
You’ll also need to decide if you’re going to register for GST.
This is an consumer tax and you must register if your turnover is over $60k per year regardless of where your sales are made. If you’re selling to NZ and importing from overseas then it makes sense to register as you can claim your own GST expenses against your GST charged to customers.
If you’re selling overseas only then your business will be more lucrative. You don’t have to charge GST to customers but are still entitled to make GST claims on all your purchases.
As a non-gst sole trader, while you don’t include a GST component, which is great for selling (or undercutting your competitors) you’ll have to pay GST on all your NZ purchases. Examples include import taxes, import admin fees, credit card fees). In theory it should level out on that 15% you’re not charging customers, but have to pay yourself.
You can decide, personally it’s easier to register for GST from day one.
Every 3 months you’ll complete an online form with IRD outlining your total sales, total expenses and this determines whether you get a refund or have to pay GST.
Simple right? If you’re unsure on anything, seek tax advise from the start.
3. Get Accounting Software
It always amazes me how many people are still using a big black book or an Excel document for tracking their finances. Don’t do that.
Get yourself setup with some tailor made custom software. You definitely don’t need to spend much with many companies offering a free or premium plan.
I use Wave Apps in my business, it’s tailored towards New Zealand and includes GST capabilities.
You can connect your bank accounts, credit cards and other accounts such as Paypal and when transactions show up in those platforms, Wave will automatically update too allowing you to reconcile them instantly.
Doing this from day one will make your tax return a breeze. Don’t wait until the following year to try and locate all those receipts for purchases. Running an eCommerce business you’ll have thousands!
Most accountants can help you setup platforms such as Xero and is beneficial to them as they can simply login and see your business accounts in real time, cool right!
3. Setup Shopify Store
You can get started with Shopify for only $29 per month (USD) and there is no lengthy contracts. You can currently get a 14 day no obligation trial too which will allow you to build and test your store and see if it’s the right platform for you.
Over a million businesses worldwide use this platform to sell online.
You can customise it using free templates provided by Shopify and install applications to make your store even cooler. Some premium themes exist which will help with your conversion rates by adding scarcity and trust to your store. These templates cost $97-$297 depending on the creators.
Shopify offers lots of free training and an extensive community forum where you can seek advice and information in building your store. Their platform allows anyone to start an e-commerce store within a few hours.
Take note, choose your Shopify store username carefully as you can’t change this once created.
Lastly you’ll need a domain name for your business which can be purchased through Shopify for $25.
A domain name is the web address, i.e. the one for this website is ki-wi.co.nz and helps people find my website online.
4. Find Winning Products
Hopefully you already know what you’re going to sell on your store, but if you don’t there are many different resources out there to find winning products.
Winning products are those that are selling well for other people, trending well or are rising up the ranks and becoming more popular.
You can find such products using premium tools that compare analytical data from around the world.
After many years of using tools such as these, Sell The Trend is definitely my favourite ($39.95/mo).
You can always use a free tool too such as Thieve.co but remember if it’s free, everyone will be using the same information.
You can also find a successful Facebook stores and under ‘Info and Ads’ on Facebook, you can view all their latest advertisements to see what they are promoting and get inspiration.
Lastly you can use platforms that share winning products with you. One of the most popular platforms currently is called Intelligyence which is a desktop platform for Windows or MAC and costs $19.95/mo.
5. Find A Reliable Supplier
Once you’ve found a great product, you now need to find a supplier.
Before rushing out and choosing the first supplier that shows up in Google you should exercise caution.
You need to consider the suppliers reputation, is the product genuine and built to a high specification. What is the minimum order quantity and can they customise the product for you? Who will handle returns on damaged products and has your product.
Also remember if you’re selling an electrical product, these will need to be inspected in New Zealand before you can ship them to customers. This can be an expensive process.
If you’re selling products for kids or children then have they been fire tested? Are there any choking hazards.
These are all questions you need to ask your supplier and consider before buying thousands of dollars worth of stock.
6. Add Products To Your Store
Once satisfied and you’ve purchased your products you can add the products to your Shopify store. Make sure you don’t copy and paste product descriptions. Write your own and sell the product to your visitors. Why do they need it, why should they buy from you?!
Don’t be lazy and copy them from Aliexpress or the suppliers website.
You simply won’t sell many products, period!
7. Get Traffic
Without traffic your business is dead in the water. Like a boat without a propeller. There are many platforms to get web traffic from but most eCommerce businesses use Facebook or Instagram Ads along with Google Shopping.
Creating such ads is an entire article in itself and would cause this article to go on for an extra few thousand words.
There are plenty of resources out there on how to create social media marketing campaigns.
You could also learn Facebook or Instagram Ads. One of the best courses for learning these two platforms which includes hours of content is eCom Elites ($197) and will show you the entire process from A-to-Z. They also have training on Google Ads and Google Shopping.
You could also use free social media resources such as posting in Groups where your customers hang out, as well as using Pinterest to share photos about your store.
Alternatively you could look into organic search engine optimisation traffic, more commonly referred to as SEO. Shopify allows you to customise pages to include such optimisation but you may wish to seek the assistance of an SEO expert.
Don’t be a fool and buy spammy backlinks from Fiverr because your mate told you it was a good idea. You will destroy your business before you even get started.
Learn How To Start eCommerce Store
Want to learn how to go further and automate your business, handle customer returns and refunds, how to make your business scale like a professional and how to use Chatbots, cool applications and sales funnels to make your drop shipping business even more profitable? Also learn Facebook ads, Instagram ads, Google ads, Google Shopping and Pinterest marketing.
eCom Elites is a training course with over 175+ HD videos on the entire process of starting an eCommerce in New Zealand. I’d suggest checking out my full review on Franklin Hatchett, an entrepreneur from Auckland, NZ that is making millions from eCommerce. If you want to learn from the best then look no further.
Remember the cost of this course is a tax deductible expense!
I hope this article has given you a good start in your eCommerce business journey.