Ecommerce Business: What It Is and How to Succeed Online

Published Monday 26 January 2026

Table of contents

• Ecommerce definition
• Types of ecommerce business models
• Advantages of ecommerce
• Challenges of ecommerce
• So what is e-business?
• What you need for an ecommerce business
• How to start an ecommerce business
• Connecting in an online sales world
• Get your ecommerce accounting sorted
• FAQs on ecommerce business

Key takeaways

• Identify your specific ecommerce business model (B2C, B2B, C2C, or C2B) to understand your target audience and tailor your selling approach accordingly.
• Account for all transaction costs including payment processor fees, shipping expenses, and courier costs when calculating your true profit margins and pricing strategy.
• Implement digital accounting tools from day one to automatically track sales across platforms, manage inventory costs, and maintain accurate financial records for better decision-making.
• Focus on creating a simple, secure, and user-friendly online experience since strong ecommerce brands depend on excellent user experience and community building to retain customers in a competitive digital marketplace.

Ecommerce definition

Ecommerce is a business that sells goods and services online, handling all transactions digitally instead of in person.

Retail ecommerce is the most common type. Businesses sell products through their websites or digital marketplaces like Amazon, Alibaba or Facebook. Customers browse, select and purchase online, then receive delivery via courier.

Service businesses also use ecommerce through online invoicing and digital payments.

Types of ecommerce business models

Ecommerce businesses connect buyers and sellers in different ways. The four main models describe who is selling to whom.

• Business-to-consumer (B2C): A business sells products or services directly to individual customers. This is the most common model, like an online clothing store or a subscription box service.
• Business-to-business (B2B): A business sells products or services to other businesses. This could be a software company selling to other firms or a wholesaler selling office supplies online.
• Consumer-to-consumer (C2C): Consumers sell directly to other consumers through an online marketplace. Think of platforms like Trade Me or Facebook Marketplace where individuals list their own items for sale.
• Consumer-to-business (C2B): An individual sells their products or services to a business. For example, a freelance photographer might sell their photos to a marketing agency.

Advantages of ecommerce

Selling online offers several advantages:

• Customer convenience: Shoppers can browse and buy 24/7 from anywhere
• Faster payments: Digital invoices get paid quicker than paper bills
• Automated sales: Customers self-serve, letting you earn while you sleep
• Lower costs: Online businesses avoid rent and staffing expenses
• Global reach: Selling beyond your local area becomes simpler
• Easy records: Electronic transactions automatically create digital records

Challenges of ecommerce

Ecommerce also comes with some challenges to plan for:

• Allow for transaction costs: Payment processors charge fees for each sale
• Manage shipping expenses: Customers often expect low-cost or free delivery, which can affect your margins
• Streamline returns: Processing refunds and returned items takes time and money
• Keep up with technology: Staying current with digital tools requires ongoing effort
• Understand tax rules: International sales may require collecting and remitting foreign taxes
• Track profit clearly: Multiple fees can make it harder to see your true profitability

So what is e-business?

E-business is any business function or process conducted digitally. All ecommerce qualifies as e-business because you're selling digitally.

However, e-business includes other digital activities beyond selling:

• Accounting: Managing finances digitally
• Marketing: Promoting products online
• Procurement: Purchasing supplies digitally

What you need for an ecommerce business

Ecommerce businesses need specific digital tools to communicate prices and process payments online. These requirements vary depending on your business type.

Retail ecommerce

For a retail ecommerce business, you typically need:

• Website: Displays your products for customer browsing
• Shopping cart: Lets customers select and collect items for purchase
• Payment system: Processes credit cards and digital payments securely
• Delivery service: Ships products from your business to customers
• Terms of trade: Covers returns, warranties and customer policies

Digital marketplaces often supply many of these services, such as online payment and delivery services. But be aware that they will take a cut of sales and may be slow to pass payments through to you.

If you want to build your own shop, you can use an off-the-shelf ecommerce platform to process customer orders and payments.

Service or manufacturing ecommerce

If you sell services or manufacture goods, you usually need:

• Online invoicing: Send bills digitally to customers
• Payment processing: Accept credit cards and bank transfers securely
• Payment terms: Require digital payment as a condition of service

Online invoicing is a feature on accounting software like Xero. To include a 'pay now' or 'direct debit' option, you need to attach a payment service, and some platforms even let you share accounting files with lenders to approve unsecured loans of up to A$50,000 or more. Those merchant services cost nothing to set up, however they charge transaction fees.

Nailing the accounting

Ecommerce businesses need to allow for transaction fees from payment processors. Delivery businesses also pay courier costs for shipping goods.

Digital accounting tools help track these expenses accurately. Software like Xero and A2X helps you work out the true cost of each sale by factoring in all fees. You can add more capability through the Xero App Store, which offers apps for many different industries.

How to start an ecommerce business

Starting an ecommerce business involves a few key steps. A good plan will help you launch successfully and avoid common pitfalls.

1. Find your product and niche. Decide what you want to sell and who you want to sell it to. Research the market to find an opportunity where you can stand out.
2. Create a business plan. Outline your goals, target market, and how you'll fund the business. This plan will be your roadmap.
3. Choose a business structure and name. Register your business name and decide on the right legal structure, like a sole trader or a limited company.
4. Build your online store. Select an ecommerce platform or build your own website. Focus on creating a simple, secure, and user-friendly experience for your customers.
5. Set up your finances. Open a business bank account and get your accounting in order from day one. This makes it easier to track your income, expenses, and profitability.

Connecting in an online sales world

Building customer relationships online requires different strategies than traditional businesses. Online shoppers have endless options, making your digital experience and brand strength crucial.

Strong ecommerce brands focus on user experience and community building. Your website design, customer service and brand messaging determine whether customers return.

If you want to build a resilient ecommerce business, find out how to optimise your online selling strategy and connect with your online community.

Get your ecommerce accounting sorted

Running a successful ecommerce business means staying on top of your finances. You need a clear view of your numbers, from tracking sales across different platforms to managing inventory and shipping costs. Online accounting software simplifies this by automating tasks and giving you real-time insights into your cash flow.

This helps you make smarter decisions and focus on growing your business, not just running your books. When you're ready to simplify your finances, you can get one month free.

FAQs on ecommerce business

Here are answers to some common questions about ecommerce.

What is the most profitable ecommerce business?

Profitability in ecommerce depends on many factors, including your niche, profit margins, and operating costs. Popular and often profitable areas include fashion, beauty products, home goods, and digital products like online courses. The key is to find a niche with strong demand and manageable competition.

Do I need a business licence to sell online in New Zealand?

You don't always need a specific licence just to sell online in New Zealand, but you must comply with all standard business, tax, and consumer laws. This includes registering as a sole trader or company and registering for GST if your turnover exceeds the threshold, which applies if your business's taxable activity turnover is at least $60,000 in a 12-month period. It's a good idea to check the requirements for your specific industry.

How much does it cost to start an ecommerce business?

The cost to start an ecommerce business can vary widely. It can be as low as a few hundred dollars for a basic website and initial stock, or much more for custom websites, significant inventory, and marketing. Key costs typically include website platform fees, payment processing fees, inventory, and marketing expenses.