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The world of eCommerce is becoming an increasingly popular medium for businesses. For instance, you may know of successful online marketplace platforms such as TradeMe or Shopify. However, before you begin, it would be helpful to understand the different types of eCommerce businesses that you could venture into. 

This article will explain an eCommerce business and explore the pros and cons of entering into the various types available to you. 

What is an eCommerce business?

ECommerce businesses typically involve the buying and selling goods and services over the internet. While this may seem simple, there are several different forms that an eCommerce business can take. Generally, they will vary due to the relationship between the parties, including the:

  • manufacturer; 
  • packager; and 
  • seller of the products. 

Some of the types of eCommerce businesses include:

  • dropshipping;
  • wholesaling;
  • subscription boxes;
  • private manufacturing and sale. 

However, even though you may be conducting business online, you must still obey New Zealand consumer law. Further, you will need to ensure that your products are good quality and fit for it’s purpose. Additionally, you must ensure that you accurately advertise your products and clearly state the correct price. Finally, you will need to pay income tax on your earnings from your business and GST if your business earns more than $60,000 a year. 

Dropshipping

One of the fastest-growing eCommerce businesses is dropshipping. Typically, dropshipping involves someone selling products that they do not manufacture themselves. People who dropship connect buyers to the product’s manufacturers, facilitating the transaction. Dropshippers are not responsible for the manufacturing or shipping of the product. Often, they do not even come into contact with a single product.

Through this variation, you can profit by marking up the price of the goods and taking a small cut to facilitate the transaction. 

Although drop shipping can be highly profitable, it can also be highly competitive. So, ensure that your business has a good foundation if you enter this market.

Additionally, with drop shipping, you will not handle any products yourself. However, you are still accountable if there is an issue with a product. Therefore, you should ensure that you have a good relationship with the manufacturer of the products you sell. 

Wholesaling

A wholesaler facilitates transactions between a manufacturer and a retailer. Generally, a wholesaler will buy products in bulk from a manufacturer and then transfer them to a retailer for a profit. In some cases, wholesalers purchase products at a low price and then sell them through their online store at a marked-up price.

Wholesaling can sometimes be risky, as it involves buying vast amounts of products that retailers may not purchase. Therefore, as a wholesaler, you are taking on the risk of purchasing a large amount of stock. However, if you can find a good product with consistent sales, there are enormous possibilities for this to be successful as an eCommerce business. 

Subscription Boxes

You may think that subscriptions only refer to magazines or newspapers. However, subscription boxes are now a popular eCommerce venture. While there is a lot of flexibility for this type of venture, consumers will typically sign up to receive a subscription box by paying a regular fee in exchange for the monthly delivery of a box of products that fit the theme. For example, you can have a book, wine, or plant subscription box.

If you have an area you are passionate about and are interested in sourcing products, you may be the perfect person to start a subscription box. Further, if you have many subscribers, this may be challenging to handle by yourself. However, it is a great way to be creative and shine a light on some lesser-known products. 

Private Manufacturing and Sale

If you have a talent for developing products and have the means to manufacture them, you may consider venturing into private manufacturing and sale. Through this variation, you will need to:

  • manufacture; 
  • package; 
  • sell; and 
  • ship the products to customers.

Alternatively, you could sell these goods through an existing online marketplace like TradeMe, or your website or social media page. This is a common way to do business online and has several benefits. Moreover, you will have total control over the business, so you will see every product that your company sends to your customers. Essentially, you can create a high-quality experience from beginning to end. 

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Key Takeaways 

Starting an eCommerce business can be a fascinating venture. There is enormous potential for a successful eCommerce business based on your: 

  • skills; 
  • relationships; and 
  • experience. 

If you are a successful product manufacturer, you may wish to start a private manufacturing and sale business. Or, if you have strong business skills, you may want to create a dropshipping or wholesale business. 

If you need help starting an eCommerce business, our experienced eCommerce lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

Does my dropshipping business need to obey New Zealand consumer law?

Yes, if you sell products in New Zealand, you must ensure that you obey all New Zealand consumer, advertising, and tax laws. 

Do I need to sell goods I privately manufacture on an online marketplace like TradeMe?

You can sell goods through an existing marketplace like TradeMe. However, you can also create your website or sell them through social media forums like Facebook marketplace.

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