Benefits Of Being An Online E-Commerce Business.
The Covid-19 pandemic has caused unrest among many businesses. Retail businesses are some of the highly affected companies, where brick-and-mortar establishments had to close shop as the pandemic raged on. In the wake of this painful period, online retailers made a massive fortune as they became people’s only alternative. This turn of fortune gave birth to a new perspective towards e-commerce business – from customers around the country. Traditionally, many of them were comfortable walking into a physical shop and buy. But now, they have been forced to embrace shopping online. As a result, the e-commerce business is estimated to have grown by a staggering 44% in 2020.
An e-commerce business engages in electronically buying or selling products through online services or over the internet. There is no physical contact between the buyer and the seller. Therefore, besides the benefit of a growing customer base due to rising internet usage, such a business is easy to set up. These days, starting an e-commerce business can be accomplished even with $100 alone. However, the start-up costs vary, depending on several factors. Some of them are the type of e-commerce business you want to start and your marketing strategy.
What are the benefits of being an online e-commerce business?
Besides the few benefits highlighted above, I have listed other benefits that should motivate you.
1. You can earn money in many ways
An e-commerce business can make money through several channels. I hate to say this, but yes, I can’t say the same about us, accountants! We are so limited in the things we can do for businesses. But have you ever spent ten or more minutes on an e-commerce business’s product pages? What did you see? Did you see them selling just a couple of products, or it’s a wide range from electronics to books, food, and clothing items? There is a lot that an e-commerce retailer can sell. Besides selling goods and services, you can also make money through advertising income, internet auctions and bartering, and referral fees from list sharing. But these all depend on your preferences for your platform.
2. Tax benefits
The rise of internet usage only started in the 1990s in the U.S., giving birth also to e-commerce. The government saw that this was a lucrative opportunity for the people and the federal government in the long term, with more employment creation and a potential upside on tax revenue. This explains the shift in tax law from focusing on facilitating growth in e-commerce markets to ensuring that online businesses contribute their fair share of revenues to the public coffers.
As a result, in 1998, Congress passed the Internet Tax Freedom Act. It imposed a 3-year moratorium on duplicate or discriminatory taxes levied on e-commerce activities. More so, state and local governments were precluded from taxing internet access. Fast forward to today, we still have several tax benefits for e-commerce businesses. These include reprieve on sales tax in the majority of states and an array of tax deductions.
Examples of deductions you can claim are; the money you pay for services such as a tax professional or a lawyer. You can also deduct home office expenses, inventory storage costs, your cellphone bill, video conferencing services such as Zoom subscriptions, co-working space costs, shipping costs, costs of attaining plugins and software, as well as costs related to office supplies.
3. Rapid growth potential
Finally, e-commerce businesses still have excellent growth potential – numbers just don’t lie. In 1999, when this was still in its early stage, total online retail sales in the United States amounted to about $15 billion. This was potentially a half percentage of total retail sales in the country. It phenomenally grew to $389 billion in 2016. That year, e-commerce amounted to eight percent of total retail sales.
According to the above, U.S. e-commerce businesses made $431.6 billion in 2020. By 2025, the sector is expected to rake in more than $560 billion. Therefore, entering the fold now makes a lot of sense, given such huge growth potential. We have heard several success stories from the e-commerce business; perhaps, we could also hear from you in the future. Start now. If you are confused about starting your own business or are already in and struggling with how to pay e-commerce taxes, contact our office for our business coaching classes and tax services, respectively. We will gladly let you know how we can help you.
People have also asked the following
1. How do I build an e-commerce business?
To build an e-commerce business, you need a product to sell, a name, and a platform to do so. These are some of the popular e-commerce platforms you can use; Wix e-commerce, Shopify, Weebly, 3dcart, Esty, eBay, and Amazon.
2. What Are the Basic E-commerce Metrics I Need to Focus on First?
The best metric to focus on is traffic volumes to your site. The more people see your products, the more you are likely to make more sales.
3. What are the different types of e-commerce?
These are the main types of e-commerce; Business-to-Consumer (B2C), Business-to-Business (B2B), Consumer-to-Business (C2B), and Consumer-to-Consumer (C2C).
4. Is e-commerce profitable?
E-commerce is very profitable. Besides the money you make while selling products, you can also save more money through tax strategies – more than traditional brick-and-mortar stores. More so, the costs of running an e-commerce business are very low, increasing chances of profitability.
5. What is the best e-commerce platform for a small business?
If you search online, they will tell you their own best platforms, perhaps because they are being paid for bringing new sellers on. But the best e-commerce platform is the one that serves your interest best. If you are selling handmade or vintage items and craft supplies, Esty will be your best place to go. And, if you are collecting and selling books, you may probably choose to start your own e-commerce website from scratch. Therefore, before you decide on your platform, ask yourself what kind of a product you intend to sell.