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How To Start An eCommerce Business

eCommerce is a continually growing market with huge potential for Australian business. In fact, Australia is the eleventh largest eCommerce market in the world.

Clea Sherman
August 29, 2022

Joining common vernacular during the dotcom boom at the turn of the century, the term eCommerce refers to all retail trade carried out online as opposed to in traditional, ‘bricks and mortar’ shops.

eCommerce is a continually growing market with huge potential for Australian business. In fact, Australia is the eleventh largest eCommerce market in the world.

Estimates of the value of the Australian eCommerce market sit in the tens of billions and continue to grow. It is even estimated to make up around 9% of Australian retail trade. 

eCommerce is so popular partly because of its ability to reach the broadest possible customer base but also because of the low overheads. With eCommerce, you don't have to worry as much about store rental costs or other physical overheads. This offers flexibility in terms of lifestyle and budget. 

There is no time like the present to break into the eCommerce market in Australia. However, before you do, there are a few things you should know.

Here is our complete guide to starting an eCommerce business. Take a look at the recommended steps, then reach out to us as your product-sourcing partners. 

1. Decide what to sell

All eCommerce starts with a product. As an Australian entrepreneur who wants to get started with eCommerce, your first step is to decide what product you are going to sell.

Once you have an idea of what you are hoping to provide to customers, do some market research and ask the following:

  • How much does your product sell for?
  • How much competition is there for your chosen product?
  • Where will you source your product (i.e. who will help you design and manufacture it)?
  • What does your product cost at wholesale?
  • What is a reasonable price markup to stay competitive?
  • How can you make your product stand out from the crowd?

You need to find a way to make sure there is demand for your product and that you will be able to make a profit from your efforts, otherwise you may as well stick with your day job. 

2. Source your products/find a manufacturer

Once you have decided what you will sell as part of your Australian business venture, the next step is sourcing it. If you’re not selling goods you make yourself, you will need to find someone to do this for you and build a relationship with them. 

The simplest and most efficient way to source your eCommerce products from overseas is to work with a sourcing company or agent.

Take a look at some quick sourcing agent FAQs:

  • How does a sourcing agent work?

Simply put, the job of sourcing companies is to do the hard work for you and find the right supplier for you.

Sourcing agents come with the benefit of insight into the industry, without costing you as much as a full-time employee.

Bringing insider expertise, international contacts and existing relationships, your sourcing companies/agent can do the following for you: 

  • Research and verify suppliers in China and other countries
  • Bridge the language and culture gap
  • Source the products you need from overseas
  • Arrange to have bespoke products manufactured (if necessary)
  • Check and compare costs between suppliers
  • Take care of due diligence (contracts, quality, delivery times etc)
  • Arrange for samples to be provided
  • Negotiate costs and contracts
  • Arrange to import your goods
  • Conduct quality control checks
  • Conduct factory inspections
  • Handle the transfer of payments
  • Find the best shipping costs and options
  • Review the ethics and sustainable practices of suppliers

These days, quality sourcing companies or agents make it a priority to work with ethically sound producers to ensure that all your products come from factories whose employees:

  • Receive award wages
  • Only use adult labour
  • Comply with occupational health and safety protocols
  • Follow sustainable manufacturing practices

  • The sourcing companies/ sourcing agent process

To get started as an Australian entrepreneur with an eCommerce business, reach out to a few different sourcing companies or agents to find one who can meet your specific needs. If you are looking to import from China, find someone who is well-connected in this part of the world.

When you’re ready to proceed, your experience will probably look something like this:

  • You have a meeting with your sourcing agent to go over your needs.
  • Your sourcing agent conducts product research to find out which manufacturer can offer the right goods at the right price.
  • Suppliers will be visited in person by someone based in China to verify quality and production methods.
  • The product is developed and a sample is delivered.
  • Your sourcing agent will handle pricing negotiation and fill in the necessary gaps by arranging to ship it to Australia and be received when it arrives etc.
  • You receive your ready-to-sell or use product.
  • You continue your relationship with the supplier or stay in touch with your sourcing agent for additional support.

Your service may also include a product feasibility assessment and the monitoring of production so any issues can be rapidly resolved.

3. Choose between Alibaba vs bespoke products

When you run an eCommerce business in Australia, you have the choice of selling a completely unique product or sourcing existing products from overseas manufacturers, either to sell as-is or to make your own. 

These days, one place to start to find existing goods is Alibaba. When you are sourcing goods from overseas, you need to understand the best practices when it comes to this retail giant.

 

  • About Alibaba 

 Jack Ma founded Alibaba to help Chinese retailers connect with global buyers. You can now find almost anything on Alibaba and import it from China or other countries to Australia.

Alibaba has changed the face of retail. The platform now hosts transactions between importers and exporters from more than 240 countries and regions. The number of active sellers who use the platform exceeds 8 million, and over 12 billion orders are placed each year. The number of active buyers is more than 770 million

Alibaba does not cater exclusively to businesses, but some larger manufacturers do prefer to deal with registered businesses so spend some time establishing your seller-facing brand if you plan to rely heavily on Alibaba. 

 

  • Alibaba import costs

 Importing goods comes with more than simply the cost of the products. There are other costs that you need to work into your budget.

These costs include: 

  • Shipping to Australia
  • Freight in Australia
  • Storage in Australia
  • Tax, including import processing and customs import duty
  • GST import costs
  • Excise on alcohol, tobacco or fuel
  • Insurance

These apply to Alibaba products as well as products from smaller manufacturers. 

 

  • Use a sourcing agent to import goods into Australia from Alibaba

With its sheer scale and the number of merchants available, Alibaba can be quite overwhelming for many aspiring retailers. It is structured so that anyone can make an order, but you still need to know what to look out for and how to avoid the risks and potential pitfalls. 

Once again, the best choice is to go with a sourcing agent. They will apply their know-how to select a cost-effective product and ensure a smooth product sourcing, negotiation and delivery process. A sourcing agent will also ensure you interact with a verified supplier, help you arrange a sample, appoint an inspector and guide you through the import process by recommending the most suitable freight option and confirming you tick all the necessary boxes in terms of Government requirements. 

 

Read our full guide: Importing from Alibaba to Australia

 

4. Figure out your GST import costs for Australia

When you import taxable goods, the Department of Home Affairs collects GST on the products you import for your eCommerce business. They usually tax 10% of the value of the taxable importation.

The value of taxable importation is the sum of:

  • the customs value of the goods
  • any customs duty payable
  • the amount paid or payable to transport the goods to their place of consignment in Australia
  • the insurance cost for that transport
  • any wine tax payable

 

There are a few exceptions and things to be aware of, for example: 

  • If you are a GST-registered business or organisation and you import goods as part of your activities, you may be able to claim a GST credit for any GST you pay on those goods.
  • It’s a good idea to look into the deferred GST scheme. This allows your business to defer the payment of GST on taxable importations until the first activity statement you lodge after the goods are imported. 

 

If you hope to be eligible for the deferred GST scheme, you have to meet certain criteria beforehand. The best thing to do is to stay up to date with your activity statements and file them with the ATO each month, but you should also check out the ATO website here.

A sourcing agent can help you calculate GST costs when you import goods from China to Australia. 

5. Think about insurance

When you purchase goods from overseas through Alibaba or other manufacturers, they recommend you take out comprehensive insurance. 

With so many insurers to choose from, this is another opportunity to make the most of the services of a sourcing agent.

Factor in your insurance as part of the overall cost of buying goods from overseas to sell in Australia; it’s always better to be safe than sorry. 

6. Research trademarks and trademark laws

Registering a trademark protects your intellectual property, and it does so in a few different ways.

Some of the benefits of trademark law include: 

  • Protection of your brand: Registering a trademark not only helps to protect your brand from being used without your permission, but it can also help to prevent others from using a similar name or logo that could cause confusion. 

  • Legal action: If someone does infringe on your rights, registering a trademark makes it easier to get them to stop. 

  • Higher price: In some cases, registering a trademark can help you sell your product for more.

  • Competitive edge: Registering a trademark can give you a competitive advantage and help you build a strong brand. 

In short, if you want your brand and intellectual property to be unique to your business, you must protect them by trademarking them.

Registering a Trademark For Product: A quick guide

Registering a trademark is simple but can be time-consuming.

The Australian Government’s IP Australia site has a detailed run down of exactly what to do if you want to register a trademark. This is broken down into five steps:

  1. Decide if you have a trademark: Before you try to register a trademark, you must be sure it is eligible. There are some words and symbols that you are not able to trademark, for instance, a Stop sign or a commonly used word. Try the trademark assistant at business.gov.au to see if you are on the right track.
  2. Understand goods and services: When you apply for a trademark, you will be asked to provide the goods and services that your trademark will protect. Again, head to the trademark assistant to learn more.
  3. Search: Use IP Australia's trademark search to ensure your IP isn't already trademarked by another business.
  4. Apply: You will need to apply for your trademark, either directly through the IP Australia website or with the help of your lawyer.
  5. Application outcome: You will hear back from IP Australia as to whether you were successful. If a lawyer is helping you with the process, they may explain options to counter a refusal.

The time it takes for trademark approval can be affected by the complexity of your trademark and the similarity to already registered trademarks. IP Australia is currently undergoing a high volume of trademark applications. Keep this in mind when you organise your timelines around trademark approval.

Read our full guide: Registering trademark for products

7. Check timelines for shipping

With the impact of the pandemic and political situations around the world, you have to be prepared for shipping times to be longer than they might have been in the past.

The good news is that shipping between Asia and Australia is not as severely affected as shipping from some other regions. 

Even still, at the very least, it will take days for your shipment to arrive, but timelines may run into the months. Dealing with shipping times is another reason why it’s wise to work with a sourcing agent who can help you to manage your timelines.

Read more: Port congestion, container shortages and shipping costs

8. Figure out how much tax you will need to pay

When it comes to tax, if you’re bringing goods worth over $1,000 into Australia to sell, you will need to hand some money over to the Government. 

Australian tax does factor into Alibaba's import costs. It is broken into two parts:

 

  • Import processing charges; the fees customs will charge for processing your goods. This is based on the value of your goods and is currently between $23 and $192, depending on how your goods arrive (by air, post or sea), how you lodge your import declaration and the value of your goods. You’ll find a breakdown of the costs here

 

  • Customs import duty, which is calculated as a percentage of the price you paid for the goods. Usually, customs duty will be 5% of the cost of the goods, so if you have paid $200,000 for your products, the tax will be $10,000.

9. Research minimum order quantity (MOQ)

Minimum order quantity (MOQ) is another critical factor that all eCommerce stores need to understand. 

Simply put, MOQ is the minimum amount of the product that your provider will allow you to buy. Suppliers do this to ensure that their production costs are covered.

The risk for you as a retailer is that you end up with more stock than you can reasonably expect to sell. You need to work out your finances and sales projections before you commit to buying a high quantity of any product.

Read our full guide: Understanding Minimum Order Quantity

10. Be aware of common mistakes made by eCommerce businesses

There are a few roadblocks eCommerce business owners run into when they start out. Knowing the most common pitfalls from the outset can help your business to be one step ahead of the competition.

Here are a few common mistakes and how to solve them:

  • Not understanding your market: You have to know who you are selling to. If you don’t have a clear idea of your target buyers, you can’t appropriately target your marketing to support your sales. Do your research and learn exactly who is buying your product so you can craft a message that resonates with them.
  • No scalability: If everything goes well, your business will grow. If you have chosen a strategy that doesn’t allow you to scale up, you will hit a plateau. Choose a selling platform with maximum scalability and always be on the lookout to optimise the sales experience for your business as well as your customers.
  • Failing to utilise SEO: Search engine optimisation (SEO) is how people find eCommerce vendors online. If you don’t use it to your advantage, your business will go unnoticed. Make sure that your website has the right keywords to put you at the top of search engine algorithms and connect with a provider to work out a Google Ads strategy
  • Ignoring social media: Many brands only sell through social media platforms like Instagram and Facebook these days. It takes time and effort but if you are able to create a presence on these platforms you will see your business start to take off
  • No strong branding: Your customers need to know who you are and what your purpose is. People associate strong branding with quality.  
  • Poor customer service: Take care of your customers, and they will come back to you. This includes being communicative, working with a good freight provider and ensuring the products you sell are good quality and value for money. 

11. Figure out how you will sell: Bespoke eCommerce website vs Shopify vs eBay and Etsy… and bespoke products vs whitelabel products vs dropship model

These days, unless you are selling something very specialised, you should be able to use an existing platform to set up your eCommerce store. The three biggest right now are probably eBay, Shopify, and Etsy. Each caters to a different style and market. It’s best to understand how each works before you make your decision on which store to go with.

Here is some helpful information: 

How to set up a Shopify store

As of 2022, 1.75 million merchants sell on the Shopify platform and 1.59 million live websites use Shopify. Shopify was specifically developed to allow anyone to set up an online store to sell their product(s).

Shopify is a subscription-based platform, meaning you have to pay a monthly fee. Fees range from around $10 a month for a basic set-up to hundreds of dollars for a more complex store.

At the basic level, you can sell your product through Shopify without setting up your own store. Higher levels allow you to build your own online store with much clearer branding.

If you choose Shopify, you can sell almost anything you want (as long as it is legal to do so). 

How to set up an Etsy store

Etsy was initially created to help people sell handmade and vintage items. While Etsy has changed and grown over time, the focus is still on handmade and vintage products.

Because of this, Etsy is not as flexible as Shopify. Many online sellers have an Etsy store as a secondary selling point or in conjunction with an eBay store. 

Etsy is easy to use. Setting up an account is as simple as following the prompts and submitting your product information. Etsy charges listing fees and payment fees, but both are minimal.

How to set up your own website

Unless you are skilled in web development, you may wish to reach out to a developer to create a website from scratch to help you as an entrepreneur. This can have upfront costs but may align with your strategy to reach buyers. 

Remember to include all the great features of an eCommerce website such as product recommendations, multiple options for payments and triggers for abandoned cart emails. 

Bespoke products vs whitelabel products vs dropship model

Bespoke products are unique to your business. You can have success with bespoke products but you need to ensure that buyers exist before you place an order with a manufacturer in large quantities. 

With whitelabel products, you choose an existing product and add your own brand/logo to it. This can help you save on product development costs. Your sourcing agent will help you source the best quality goods to whitelabel and liaise with your manufacturer so they look great. 

The drop ship model can be risky; it involves sending goods to your customers without you handling them yourself. Speak to your sourcing agent about whether this is a sustainable option as it can depend on what you have to sell. 

12. Get used to balancing cash flow as an eCommerce business

In eCommerce, most businesses are small, often just one person. For this reason, it can be easy to let proper accounting slide. 

The most important thing with your cash flow is to make sure you have more money coming in than going out. There are a few ways you can keep track of this:

  • The old-fashioned way: The old-fashioned way is to get hold of a ledger and a calculator and write down all your transactions. This is the cheapest way to deal with your finances, but it is time-consuming and easy to make mistakes, especially when orders are coming in in the hundreds or thousands.
  • Hire a professional: Hiring an accountant or bookkeeper is a much better way to keep track of your finances. They will help you take control of your cash flow and they can also advise you on ways to grow your business.
  • Pay for software: If an accountant is out of your price range, you can at least invest in some accounting software. Software like MYOB and Xero makes reconciling accounts and keeping track of where you are at financially easier. You can even use them in conjunction with an accountant if it helps to cut costs.

Final tips for eCommerce entrepreneurs

Customers respond to a unique story and quality products. The more research and groundwork you put in early, the more likely you will be to have success as an eCommerce vendor. 

The other thing worth noting is that it takes time to turn your eCommerce venture into a goldmine. Expect the early days to be filled with ironing out issues and manually packing parcels for customers. You may find you need to create your store while you hold onto your day job so you can be sure it is viable. 

At the end of the day, the customer comes first. You will never get far without a quality product that offers value for money so work with a skilled sourcing agent to ensure you are selling something people want and appreciate.

Plan for everything, surround yourself with the right people, LOVE your customers and you will have lasting success. 

At Epic Sourcing, we take care to source quality products for Australian entrepreneurs. We want to represent clients who are doing the right thing by their clients and aim to establish lasting, mutually beneficial partnerships. Contact us to find out more.

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