What is an ecommerce business?

Published Monday 11 May 2026

Table of contents

• What is an ecommerce business?
• Types of ecommerce businesses
• Advantages of an ecommerce business
• Challenges of an ecommerce business
• How to start an ecommerce business in Australia
• What you need for an ecommerce business
• Manage your ecommerce finances with Xero
• FAQs on ecommerce businesses

Key takeaways

• Ecommerce lets you sell products or services online to customers anywhere in Australia and beyond, with lower overhead costs than a physical shopfront.
• Australians spent AUD 69 billion online in 2024, making it one of the fastest-growing sales channels for small businesses.
• Starting an ecommerce business in Australia involves registering your business, getting an ABN, choosing a platform, and setting up accounting from day one.
• Connecting your ecommerce platform with accounting software like Xero can help you stay on top of sales, expenses, and GST obligations automatically.

What is an ecommerce business?

If you're thinking about selling online, it helps to understand what ecommerce actually means and how big the opportunity is in Australia.

An ecommerce business sells goods or services through the internet instead of (or alongside) a physical store. Transactions happen on a website, app, or online marketplace, and payments are processed digitally.

The Australian ecommerce market is booming. Australians spent AUD 69 billion online in 2024, a 12% year-on-year increase according to the Australia Post eCommerce Industry Report 2024. Australia's business-to-consumer (B2C) ecommerce market was valued at approximately AUD 104 billion in 2024.

Ecommerce covers a broad range of activity. You could sell physical products like clothing or homewares, digital products like courses and templates, or services like consulting and design. If a transaction happens online, it counts as ecommerce.

The growth in online shopping has been driven by changing consumer habits, improved delivery networks, and the rise of mobile commerce. For small businesses, this shift creates a real opportunity to reach customers without the costs of a physical shopfront. If you're exploring your options, our guide to starting an online business covers the broader picture.

Types of ecommerce businesses

Ecommerce businesses come in different shapes depending on who's buying and who's selling. Understanding the main models can help you decide which approach suits your idea. Many successful online businesses combine more than one model as they grow.

The four main ecommerce business models are:

• Business-to-consumer (B2C): a business sells directly to individual customers. This is the most common model and includes online retailers like clothing stores, beauty brands, and food delivery services
• Business-to-business (B2B): a business sells products or services to other businesses. For example, a wholesaler supplying office equipment to companies or a software provider selling to accounting firms
• Consumer-to-consumer (C2C): individuals sell to other individuals through platforms like eBay, Facebook Marketplace, or Gumtree
• Consumer-to-business (C2B): individuals offer products or services to businesses. Freelance designers, stock photographers, and influencers working with brands all fall into this category

How you deliver your products also varies. Here are common fulfilment methods for ecommerce businesses:

• Direct-to-consumer (DTC): you manufacture and sell your own products straight to customers
• Dropshipping: you list products on your store, but a third-party supplier handles storage and shipping. Learn more about how dropshipping works
• Wholesaling: you buy products in bulk and resell them at a markup
• Subscription: customers pay a recurring fee for regular deliveries or access to your product or service

Advantages of an ecommerce business

Selling online offers clear benefits over a traditional bricks-and-mortar setup. Here are some of the biggest advantages of running an ecommerce business.

• Lower startup costs: you don't need to pay rent on a shopfront, fit out a retail space, or hire in-store staff. This makes it more affordable to get started
• 24/7 availability: your online store never closes. Customers can browse and buy at any time, which means you can earn revenue even while you sleep
• Wider reach: you're not limited to foot traffic in one location. You can sell to customers across Australia or internationally from a single website, making ecommerce well suited to home-based businesses
• Convenience for customers: online shopping fits into busy lifestyles. Customers can compare prices, read reviews, and order from their phone or laptop
• Scalability: it's easier to grow an online store than a physical one. You can add products, enter new markets, and increase sales without the expense of opening new locations
• Easier record-keeping: digital transactions create automatic records. When you connect your ecommerce platform to ecommerce accounting software, sales data flows straight into your books
• Data-driven decisions: ecommerce platforms track customer behaviour, sales trends, and marketing performance so you can make informed choices about your business

Challenges of an ecommerce business

Running an online business isn't without its hurdles. Being aware of common challenges can help you plan for them from the start.

• Transaction fees: payment gateways and ecommerce platforms charge fees on every sale. These can add up, especially on high-volume, low-margin products
• Shipping costs and logistics: getting products to customers quickly and affordably is one of the biggest operational challenges. Shipping costs in Australia can be high, particularly for regional and remote areas
• Returns and refunds: Australian Consumer Law gives customers the right to a refund, replacement, or repair for faulty goods. You'll need a clear returns policy and a process for handling them efficiently
• Cybersecurity risks: online businesses handle sensitive customer data, including payment details. You'll need to invest in secure hosting, SSL certificates, and payment processing to protect your customers and your reputation
• Intense competition: the barrier to entry is low, which means many sellers compete for the same customers. Standing out requires strong branding, good products, and effective marketing
• Tax compliance across borders: if you sell interstate or overseas, you'll need to understand GST obligations, international tax rules, and customs requirements. The ATO's GST registration guide is a good place to start

How to start an ecommerce business in Australia

Getting your ecommerce business off the ground takes some planning, but the process is straightforward. Here are eight steps to help you launch with confidence. Each step builds on the one before it, so working through them in order gives you a solid foundation.

1. Research your business idea

Before you invest time and money, make sure there's demand for what you want to sell. Look at competitors in the Australian market. Study their pricing, product range, and customer reviews to find gaps you could fill.

Talk to potential customers and test your idea on a small scale if you can. Free tools like Google Trends can help you spot what Australians are searching for online. For inspiration, explore online business ideas you can start today.

Validate your idea by looking at search volume, social media conversations, and existing marketplace listings. If similar products are selling well, that's a positive sign there's an audience ready to buy.

2. Register your business and ABN

To operate legally in Australia, you'll need to choose a business structure (sole trader, partnership, company, or trust) and register it. You'll also need an Australian Business Number (ABN), which you can apply for free through the Australian Government's business registration portal.

If you expect your annual turnover to reach $75,000 or more, you must register for GST. Even if you're below that threshold, voluntary GST registration can be worthwhile because it lets you claim GST credits on business purchases.

You may also need to register a business name if you're trading under a name other than your own. This is separate from your ABN and costs around $39 for one year or $92 for three years through the Australian Securities and Investments Commission (ASIC).

3. Choose what to sell

Decide whether you'll sell physical products, digital products, services, or a combination. Think about what you're passionate about, what skills you have, and where the market opportunity sits.

Consider factors like profit margins, shipping complexity, and storage requirements. Digital products and services often have lower overheads because there's nothing to ship or store.

It's also worth thinking about whether your product solves a specific problem or fills a niche. Products with a clear value proposition tend to attract more loyal customers and generate stronger word-of-mouth referrals.

4. Source your products

Once you know what you're selling, figure out where it'll come from. You might manufacture products yourself, work with an Australian supplier, import from overseas, or use a dropshipping model.

If you're importing goods, factor in customs duties, shipping times, and quality control. For local sourcing, build relationships with reliable suppliers who can scale with you as your business grows.

Order samples before committing to a supplier. This lets you check product quality firsthand and test shipping times. It's a small upfront cost that can save you from bigger problems down the track.

5. Choose an ecommerce platform

Your ecommerce platform is the foundation of your online store. Popular options in Australia include Shopify, WooCommerce, BigCommerce, and Squarespace. Each has different pricing, features, and levels of customisation.

Look for a platform that handles Australian dollars, integrates with local payment gateways, and connects with your accounting software. Ease of use matters too, especially if you're not technically minded.

Most platforms offer a free trial period, so take advantage of that to test the interface and features before committing. The guide on how to sell products online walks through the basics of marketplace and website selling. Pay attention to transaction fees, monthly costs, and any limits on product listings or bandwidth.

6. Set up payments

Accepting payments smoothly is essential for converting browsers into buyers. You'll need a payment gateway to process online transactions securely.

Stripe, PayPal, and Square are widely used in Australia. Most ecommerce platforms integrate directly with these providers.

Make sure your payment setup supports credit cards, debit cards, and digital wallets like Apple Pay. Offering multiple payment options can help reduce cart abandonment. Xero integrates with popular gateways so you can accept payments and automatically match them to invoices.

7. Plan shipping and fulfilment

Shipping can make or break an ecommerce business. Decide whether you'll handle fulfilment yourself, use a third-party logistics (3PL) provider, or dropship. Compare rates from Australia Post, Sendle, and other carriers to find the best fit.

Be upfront about shipping costs and delivery times on your website. Many Australian shoppers expect free or flat-rate shipping, so consider building shipping costs into your product pricing.

If you plan to ship internationally, research customs requirements and duties for your target countries. You'll also need to decide whether you or the customer will pay import taxes. Clear communication about international shipping policies helps avoid disputes and negative reviews.

8. Set up your ecommerce accounting

Getting your finances organised from the start saves you time and stress later. Even if your sales volume is low in the early months, building good habits now means you won't need to untangle messy records later.

Connect your ecommerce platform and payment gateway to your accounting software so transactions flow through automatically.

Xero's bank feeds pull in transactions from your bank accounts daily, making reconciliation quick and simple. You can send invoices to wholesale or B2B customers, track expenses, and monitor cash flow in real time.

For high-volume sellers, apps like A2X connect your Shopify, Amazon, or eBay sales data directly to Xero. This means your revenue, fees, and refunds are broken down accurately and matched to your bank deposits. Integrations with Stripe and other payment platforms keep everything in sync.

What you need for an ecommerce business

Before you launch, run through this checklist to make sure you've covered the essentials. Having everything in place from day one helps you avoid scrambling later.

You don't need to perfect every item before your first sale, but having a solid foundation across each of these areas gives you the best chance of a smooth launch.

• Business registration and ABN: register your business structure and apply for an ABN. Register for GST if your turnover will exceed $75,000
• Ecommerce platform: choose a platform to build and host your online store, such as Shopify, WooCommerce, or BigCommerce
• Payment gateway: set up a secure way to accept credit cards, debit cards, and digital wallets
• Shipping and fulfilment solution: decide how you'll get products to customers and which carriers you'll use
• Accounting software: connect your sales channels to accounting software like Xero to track income, expenses, and GST obligations from the start
• Marketing plan: outline how you'll attract customers through search engine optimisation (SEO), social media, email marketing, or paid advertising
• Legal compliance: make sure you meet Australian Consumer Law requirements, have a privacy policy, and display clear terms and conditions
• Domain name and branding: secure a domain name that reflects your business and is easy for customers to find and type

Manage your ecommerce finances with Xero

Keeping your ecommerce finances accurate doesn't have to be complicated. Xero connects with your ecommerce platform, payment gateways, and bank accounts so your sales, expenses, and GST are tracked automatically.

With bank feeds, automated reconciliation, and integrations with tools like Shopify, Stripe, and A2X, you'll spend less time on bookkeeping and more time growing your business. Whether you're processing 10 orders a week or 10,000, Xero can help you keep your finances organised and BAS-ready.

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FAQs on ecommerce businesses

Here are answers to some frequently asked questions about ecommerce businesses.

What is the difference between ecommerce and e-business?

Ecommerce refers specifically to buying and selling goods or services online. E-business is a broader term that covers all online business activity, including customer support, supply chain management, and digital collaboration.

How much does it cost to start an ecommerce business in Australia?

A simple dropshipping store could cost a few hundred dollars, covering a domain name, platform subscription, and basic marketing. A product-based business with inventory might need $2,000 to $10,000 or more for stock, packaging, and branding.

Do I need an ABN to sell online in Australia?

Yes, if you're running a business rather than making a one-off personal sale, you need an ABN. Applying is free through the Australian Business Register, and without one, other businesses must withhold tax at the highest marginal rate.

What is the best ecommerce platform for small businesses?

There's no single best platform because it depends on your needs. Shopify is popular for ease of use, WooCommerce suits those who want more control, and BigCommerce works well for growing businesses with complex catalogues.

How do I handle GST for my ecommerce business?

If your annual turnover is $75,000 or more, you must register for GST and charge 10% on taxable sales to Australian customers. Lodge a Business Activity Statement (BAS) monthly or quarterly, and connect your ecommerce platform to accounting software to track GST automatically.