Date posted: 10/01/2024 10 min read

Shop ’til you drop

Most retailers benefit from adding an ecommerce channel to their mix. So, who are the market leaders? And, if you already have an ecommerce platform, is there a better choice?

Quick take

  • Ecommerce got a huge boost from pandemic-related lockdowns, which forced many bricks-and-mortar retailers to also become e-tailers.
  • Ecommerce platforms tend to cater to micro, medium and large e-tailers, with Shopify being the market leader.
  • E-tailers can get better financial reporting and inventory management with plug-ins and apps that complement their ecommerce platform, but the big spending will be on building your online brand.

Thanks to the supercharging impact of COVID lockdowns, ecommerce is on a tear. Online sales doubled in the past five years and are expected to double again by 2026, says global consultancy McKinsey. Australia is already the 11th largest ecommerce market in the world, and both New Zealand and Australia experienced double-digit growth in online shopping.

“During COVID, people changed their spending habits. The money that used to be diverted on travel experiences got spent on things,” says Meryl Johnston, co-founder of Bean Ninjas, a specialist ecommerce firm in Brisbane that services more than 150 retailers.

This momentum had a lasting impact on consumer behaviour. For example, Johnston recently published research that showed online sales of apparel and furnishings grew from under 10% penetration to more than 30% since 2021.

Lockdowns forced many businesses to move from physical stores to online, and then run a multichannel operation once in-person shopping returned. It’s now common for retailers to sell via an online marketplace such as Amazon, through their own website and on a couple of social media platforms.

Global brands are applying all the latest tech – big data, AI, augmented reality – to improving customer experience. For many customers switching to online shopping when buying clothes, this meant overcoming the barrier of knowing how a dress or pair of trousers will look on you, without physically trying them on. In recent years, brands such as Sephora and Warby Parker have built virtual try-on tools that use augmented reality to superimpose glasses and make-up onto a photo of the customer.

Another trend is voice search over smart speakers or smartphones. Ecommerce retailers are optimising their websites and apps for voice search to make it easier for consumers to shop.

Subscription services have become popular, from razor blades to toilet paper. But billing for these gets very complex quite quickly, once you start calculating pro-rata rates, refunds and cancellation periods. Even basic ecommerce platforms now offer the ability to sell subscription services, as well as one-off purchases.

Ecommerce platforms have also embraced buy now, pay later (BNPL) arrangements. Retailers can use BNPL to sell products and services to customers who can only afford to pay in instalments. Afterpay and the like have made it easier to access loans for small items without the need for paperwork or approval processes.

What’s on the shelf

There are many ecommerce applications targeting various regions and industries. The easiest way to understand the market is to split it into three categories, based on the size of the business.

Microbusinesses buy affordable website platforms that include the ability to add an ecommerce module. The biggest names include Wix, Squarespace and Square, which all have good-looking templates that can get an online retailer up and running quickly for very little money.

None of the three platforms are dedicated to ecommerce; Wix and Squarespace are generic website builders that cater to microbusinesses dabbling in ecommerce. Square is a payments platform cutting out the middleman for sole traders.

The convenience and affordability of these three platforms comes at a cost. They miss out on sophisticated features in more powerful ecommerce software that are essential in growing ecommerce businesses.

For example, Shopify, WooCommerce, BigCommerce and Adobe Commerce (formerly Magento) include abandoned cart recovery (following up with customers who don’t finish the checkout process); extensive integrations with third-party applications for marketing, analytics and inventory management; and multichannel selling, where you can sell through Facebook, Instagram, Amazon and eBay, as well as your own website.

They also have more advanced shipping options such as real-time carrier shipping rates, label printing and order tracking. E-tailers can also set up drop-shipping operations, where they sell products that are stored and shipped by another party.

Other attractions include better reporting and analytics (which e-tailers can use to identify and promote top-selling products or target successful audiences) and more payment options.

Why is Shopify so popular?

The default choice for anyone starting out specifically in ecommerce is Shopify. It is affordable, scalable and relatively easy to use. In the world of small ecommerce businesses, it’s the 800-pound gorilla; you have to find a reason not to go with Shopify.

Shopify’s integrations play a key role in one area – accounting. Alister Siew CA of Better Co, an Auckland firm, uses an app called A2X that creates organised summaries from feeds of uncategorised sales, fees, taxes and refunds from marketplaces such as Amazon and Etsy or ecommerce platforms such as Shopify and BigCommerce. (Shopify does have a native connection with Xero but some data is not as detailed as A2X.)

Other ecommerce platforms such as WooCommerce aren’t supported by tools like A2X. As a consequence, accountants have to manually reconcile Stripe payouts.

Shopify, like all ecommerce platforms, includes a basic inventory to display products. However, it lacks the data points to create highly useful reports in Xero.

“There’s no stock inventory management, there’s no opening and closing stock movements in Xero. You’re not really tracking the true costs of goods sold, month on month,” Siew says. “The performance report that we prepare for our clients is basically not the most useful, unless you’re just looking at pure, top-line revenue.”

Siew recommends that all clients use a separate inventory management tool such as Unleashed Software, Cin7 or Cin7 Core (formerly known as Dear). They can then report on stock turnaround time, opening stock and closing stock, and stock balance to date.

Another Shopify advantage? Ease of use in jurisdictions. Today, a New Zealand or an Australian e-tailer can sell more products to customers in the UK or the US, and must abide by rules for VAT and US state taxes. Shopify connects to automated tax compliance tools such as Avalara and TaxJar, which reduce the complexity of a multi-country customer base.

Another advantage is the choice of third-party logistics providers, known as 3PL services. Options for freight and shipping became a critical advantage during the COVID pandemic. Lockdowns in Chinese ports delayed the loading and unloading of cargo ships. E-tailers had to research new suppliers and supply routes.

The price of transporting a shipping container shot up so high that in some cases airfreight was a viable alternative.

Shopify’s extensive selection of 3PL providers was extremely valuable.

Scaling sales

There is another ecommerce platform more popular than Shopify, due to a single advantage: WooCommerce is the firstchoice ecommerce plug-in for WordPress, the world’s most popular website software. (Software tracking services estimate WordPress is used by 40% of an estimated 200 million active websites globally.) WooCommerce appears on nearly seven million of those WordPress websites. It’s almost double the four million websites running Shopify.

WooCommerce has developed into a highly customisable platform with a diverse range of plug-ins and extensions, support for various payment gateways, and relatively robust SEO capabilities. However, a new ecommerce business with no existing website is more likely to build its website with Shopify than to choose the WordPress–WooCommerce combination.

Top end of town

The top-tier ecommerce platforms power the operations of high-volume retailers, or those that want to design highly interactive, online customer experiences.

Adobe Commerce, better known as Magento before its acquisition in 2018, is a successful platform that developed a strong customer base and a large ecosystem of developers, partners and extensions. One of its attractions was that it was open source, which meant it could be customised easily and became very popular with developers.

It can also handle complex product catalogues and high traffic volumes, multiple languages, currencies and tax systems.

BigCommerce was founded two years after Magento, in 2009, and became a close competitor. It has many of the same features and went public in 2020 on the Nasdaq stock exchange.

Shopify also launched a more powerful version called Shopify Plus in 2014, which can scale to higher volumes. It has taken away the lower-end market share from the enterprise-grade ecommerce competitors.

Shopify Plus is much better suited to companies turning over more than A$10 million a year and with an established marketing team. The more advanced platform produces more data for attributing sales, allowing an ecommerce business to tweak their promotions, pricing and targeting to increase the volume or margin on sales.

However, you can’t customise the online experience in Shopify Plus to the same degree as Adobe Commerce.

Another difference to note is that BigCommerce and Shopify host all their retailers’ websites for them, while Adobe Commerce companies can choose to host their sites with Adobe or run them in their own data centres.

Pricing your shop

Pricing for ecommerce software is far more creative than a simple per-user, per-month arrangement. Smaller platforms charge a percentage on top of each transaction on the basic plans, which usually can be removed by paying a larger monthly subscription. For example, a microbusiness can pay $50 a month or less for a functioning ecommerce store from Squarespace or Wix. Square offers a version with no subscription price but a 2.2% transaction fee, so a business only pays if it makes a sale.

The larger ecommerce platforms, which can run multiple sales channels, charge an annual fee for a number of storefronts, with the option to buy more as needed. BigCommerce charges in three tiers, from US$29–$299 a month, with additional storefronts costing another US$30–$100 a month. Higher tiers offer more features, but they are also determined by volume. BigCommerce tracks your sales per year on a trailing 12-month basis and adjusts your tier accordingly. (The splits are volumes up to US$50,000, US$180,000 and US$400,000, before moving to a custom enterprise plan.)

Adobe Commerce doesn’t publish its prices because it calculates the price based on the size of the business, specific features, number of users and the level of support. As a rough guide, the starting price is in the thousands of US dollars a month.

Building a brand

Ecommerce software provides the shopfront. Retailers then typically augment basic features in key areas by integrating with specialist tools, says Jason Andrew CA, co-founder of SBO Financial, a Brisbane accounting firm with 50 ecommerce clients.

“If you want more sophisticated email marketing, or tracking around conversion rate or to add reviews to your website, then you’ll start to explore different add-ons,” Andrew says.

Popular tools include Klaviyo for email marketing, Okendo for gathering reviews or Stamp for customer retention.

The ecommerce market is now so well established that setting up a store is not the hard part, says Andrew. “Anyone can, in theory, start an ecommerce store, but getting sales is a different thing. Unless you’ve got a really big brand it’s hard to get users to your product.”

“Anyone can, in theory, start an ecommerce store, but getting sales is a different thing. Unless you’ve got a really big brand it’s hard to get users to your product.”
Jason Andrew CA, SBO Financial

The good news is that now the technical barrier to ecommerce is so much lower, retailers can spend more of their time on marketing and brand building instead.

The ecommerce opportunity

With an expected annual growth rate of 11.89% in New Zealand and 9.78% in Australia, here’s what ecommerce might look like in 2027.

New Zealand Australia 
Projected revenue: US$8.7 billion Projected revenue: US$54.68 billion
User penetration: 60.5%
User penetration: 77.6%
Average revenue per user: US$1720
Average revenue per user: US$1870

Five most popular categories:

1. Fashion
2. Toys, hobbies and DIY
3. Electronics
4. Beverages
5. Furniture.

Five most popular categories:

1. Fashion
2. Toys, hobbies and DIY
3. Electronics
4. Food
5. Beauty, health, personal and
household care.

Sources: eCommerce – New Zealand, Statista (2023); eCommerce – Australia, Statista (2023)