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How much does it cost to launch and run an ecommerce business?
Whether you’re already running an ecommerce business or about to get started, how much does it cost to start, and how much can you expect your online retailing business to cost each year? These figures will help you prepare a realistic budget and ensure you’re on track.
The two main cost areas of an ecommerce business
The costs for any ecommerce business essentially lie in two main areas:
- Getting started
- Running the business
Where will you be trading?
The cost of launching an ecommerce shop will be influenced by your goals, your budget (or budget expectation), whether you have staff or it’s just you, and the specific strategies you plan to implement.
First you need to decide WHERE to sell. There are three options:
- Host your shop on one or more marketplaces such as Amazon or eBay
There are hundreds of such marketplaces around the world today, many of which are country or region-specific. Be aware that many marketplaces only admit sellers that have been invited or approved. If you’re listing on multiple marketplaces and have more than a handful of products, you are likely to need a software solution to sync available stock quantities so you don’t sell something you can’t supply. This can get you banned by the marketplace – not a risk worth taking. On marketplaces, so it’s their rules or you’re out. - Launch your own webstore
You will need to choose an ecommerce platform and then decide whether to apply a preset theme or have a custom design created for you. Choosing the right webstore platform can be challenging as there are quite a few things to consider. - Launch a multichannel business across both webstore/s and marketplaces
You will need to choose an ecommerce platform which not only supports the size and type of webstore you require, but also integrates natively with the marketplaces you plan to sell on, or has a reliable plugin or integration solution available that will facilitate publishing products to the marketplaces, syncing stock, aggregating orders and passing carrier and tracking information back to the marketplaces. Being able to manage everything from a single dashboard is supremely important in this scenario.
Not all ecommerce platforms are the same
For the purpose of our costings, we will consider only Saas or cloud-based platforms.
Typical ecommerce business cost ranges
| Marketplace only | Webstore only | Both | |
|---|---|---|---|
| Setup | $0 – $5000 | $0 – $200,000 | $0 – $250,000 |
| Annual fixed fees | $0 – $6,000 | $500 – $45,000 | $3,500 – $100,000 |
| Annual turnover fees | 5% – 25% | 0% – 5% | 0% – 25% |
All amounts are in AUD
Remember too that time and money are interchangeable commodities. The less you have of one, the more you will need of the other. So the lower your budget, the more time you will need to invest. It’s not hard to fill up a day with mindless data formatting and petty customer complaints, so consider carefully what you are willing and able to do yourself, and what you will need to outsource to others. It’s rare for an ecommerce business to avoid outsourcing completely.
Typical ecommerce business cost ranges
You can create your listings and manage everything directly on a marketplace through your seller login. There should be no need for an external ecommerce platform unless you have a large range of products. The seller interface and functions will vary dramatically from one marketplace to another, but as the two leading global marketplaces in the western world, the seller dashboards for Amazon and eBay are both well laid out and provide comprehensive tools for monitoring and managing your business on their marketplace.
Find out how to get started on amazon.com.au
Find out how to get started on ebay.com.au
Launching and running your own online shop
There are many advantages of having your own webstore:
- You can control the customer experience
- There are no competitors on your website
- You own the customer and can market to them
- You can run promotions and sales as you choose
- You set your own trading policies
Having all these benefits makes a webstore more valuable, and so it’s quite logical that it will cost more.
In the table below, we set out the costs of setting up a webstore on popular Saas platforms:
Entry level plans
Entry level plans are just that, entry level. You can expect the platform functionality to be limited and turnover fees to be higher.
Platform setup | Monthly fees | Preset theme | |
Shopify | DIY | $42 + 1.75% | $0 – $700 |
Neto | DIY | $98* | $0 – $580 |
BigCommerce | DIY | $45* | $0 – $400 |
Shopline | DIY | $42 + 1.7% | $0 |
All amounts are in AUD
* No transaction fees. Payment processing fees are billed separately by each gateway. Neto turnover fees apply above $1.5m annual turnover.
To setup on any of these platforms yourself, you may need to spend considerable time following setup instructions on the platform help pages and may also need to contact their customer support several times during the process. If you’re low on patience or have limited technical knowledge relating to ecommerce and cloud technologies, you might regret trying to do it yourself. There is also a risk when doing things yourself that you might make incorrect assumptions about how things work, might overlook certain steps, and may not be aware of some functions that could benefit your new digital shop.
Using a preset theme on your new webstore means somebody else has made all the decisions about what customers will experience on your webstore without having taken your business needs and circumstances into account. Themes can be customised for a fee, and the more you want changed, the more it will cost. It’s not hard to run up a bill of several thousand dollars with some fairly elementary customisations. The cheapest customisations will be done by freelancers in low payrate countries. Whilst this might save you money, consider whether the designer or developer is going to have the right experience to interpret functionality, styling and layout for your customer audience. Also be aware that both freelancers and agencies can make lofty claims about their capabilities but may not be recognised by the platform as an accredited or approved partner in whom they have confidence.
Just as you wouldn’t get your car serviced by a mechanic that had no experience with that make, you’re best working only with recognised partners of the platform you’re running your business on. Lack of platform knowledge can lead unaccredited developers to inadvertently break core functions or disrupt coding that is required for platform features you may want to activate later on. Rest assured you’ll pay for it later when you’re forced to call in an experienced partner to troubleshoot functional issues with your webstore and they discover core coding has been mucked up.
Cheap and quality rarely belong in the same sentence. Choose which is most important to you and accept that the other may cost you more.
Mid level plans
| Platform setup | Monthly fees | Customised theme | |
| Shopify | $500 – $2000 | $431 + 1.4% | Varies |
| Neto | $500 – $3500 | $350* | Varies |
| BigCommerce | $500 – $2000 | $460* | Varies |
| Shopline | $500 – $2000 | $342 + 1.4% | Varies |
All amounts are in AUD
* No transaction fees. Payment processing fees are billed separately by each gateway. Neto turnover fees apply above $1.5m annual turnover.
Setting up your webstore on a mid-level plan is likely to require the services of an accredited partner of the platform you’re launching your business on. Theoretically you could still do it all yourself, but chances are if you’re planning to be on a mid-level plan, you have a larger product range and category taxonomy, specific functionality, customer experience and branding expectations, and may require platform functions configured and third-party plugins installed.
Remember the less time you have, the more money you will need to spend.
If you know you’ll be on a mid-level plan, you are also more likely to require design, layout and functional customisations to the webstore front-end which will require the services of an appropriately experienced agency or web developer familiar with the platform. How much you need to spend will depend entirely on what you need customised. Getting a few quotes is a smart move, but remember cheapest won’t be best, so choose whether best or cheapest is most important to you and set your budget expectations accordingly.
Enterprise level plans
Enterprise level plans give you full access to all platform functions and features and most notably, substantially better support. Enterprise plans are more likely to be appropriate for businesses that either have more complex requirements, have limited internal resources and staff, or have ambitious performance targets which will require faster traction. Such businesses cannot afford to wait days in a lengthy customer support queue and will want to deal with proven experts who can fast-track their growth and return on investment.
Platform setup | Monthly fees | Custom design | |
Shopify Plus | $10,000 – $50,000 | $3,600 + % | $80,000 – $120,000 |
Neto XL | $500 – $3,500 | $2,899* | $35,000 – $60,000 |
BigCommerce Enterprise | $5,000 – $20,000 | $2,500* | $50,000 – $100,000 |
Shopline Enterprise | $1,500 – $5,000 | $2,000 + % | $20,000 – $60,000 |
ZELLIS Connect | $2,500 – $5,000 | $1499 + 0.85%# | $35,000 – $60,000 |
All amounts are in AUD
* No transaction fees. Payment processing fees are billed separately by each gateway. Neto XL turnover fees apply above $1.5m annual turnover.
# ZELLIS Connect platform fees reduce at $5m annual turnover At the enterprise level of ecommerce, your budget will reflect the degree of customisation you require, plus the extent of guidance in setting up and platform training needed to get you up and running at an expert level fast. At this level, you should have a well defined brand style guide and either have an experienced marketer in-house with digital experience, or be working with a reputable marketing agency familiar with the platform you’re operating on.
If you’re going on an enterprise level plan, you’re not mucking about. You mean to grow and are committed to succeeding. The level of support you receive from the platform enterprise should be faster response and should deliver deeper platform knowledge and technical guidance. There is a risk that enterprise level support might not always live up to high expectations due to staff turnover and strategic priorities within the platform provider.
Enterprise level businesses will have a considered view about the end-to-end experience they want their customers to have, and are more likely to require a full custom webstore design, intently crafted to deliver an engaging, memorable and intuitive shopping journey from start to finish, even beyond checkout. There’s a reason some agencies and designers have top accreditation from the platforms they work on – they’re simply the best. Squabbling over a few dollars for the services of platform partners at this level is a false economy. The result is the objective, and your budget needs to reflect your commitment to achieving it. Working with agencies at this level should be a proper collaboration, the combined input of your product and category knowledge, and their technical knowledge and capabilities.
Running a multichannel ecommerce business
Running a multichannel business on one or more webstores and marketplaces requires robust technology solutions to enable these systems to communicate for stock synchronisation, central order processing and aggregating customer data for customer support, marketing and communications. Therefore the technology costs will typically be higher.
Most ecommerce platforms do not integrate natively with marketplaces, or only natively with a few, so middleware solutions will be required to bridge the gaps and enable asynchronous data integration with a central system acting as the coordinator. Whether a ‘headless’ or composable technology architecture, you’ll be taking on multiple systems that each contribute to a technological ecosystem on which your business will function.
| Technology setup | Monthly fees | Custom design | |
| Shopify Plus | $12,000 – $80,000 | $6,000 + % | $80,000 – $120,000 |
| Neto XL | $500 – $3,500 | $2,899* | $35,000 – $60,000 |
| BigCommerce Enterprise | $7,000 – $40,000 | $5,000* | $50,000 – $100,000 |
| Shopline Enterprise | $3,500 – $15,000 | $4,500 + % | $20,000 – $60,000 |
| ZELLIS Connect | $4,500 – $10,000 | $1999 + 0.85%# | $35,000 – $60,000 |
All amounts are in AUD
* No transaction fees. Payment processing fees are billed separately by each gateway.
The technology setup costs above include activation and configuration of middleware and PIM integrator solutions to connect marketplaces with your ecommerce platform. Some ecommerce platforms have limited functionality suitable for marketplaces. Some middleware solutions only integrate with certain marketplaces, so you will need to carefully research the integration solutions that will work with the channels you plan to sell through. Seeking advice from accredited partners of the ecommerce platform at the centre of your tech stack may save you a lot of time and money, and should reduce the amount of trial and error needed to get up and running.
An overriding principle is that less is more. The less software solutions and platforms you have, the less can go wrong. The less providers you have to deal with, the quicker you will have issues resolved when something does go wrong.
What is the average cost of technology for an ecommerce business?
Cost of technology is measured as a percentage. When your business is running at scale from $1m annual turnover and above, all of your technology costs in aggregate should be running at between 3 to 5% of your total turnover. If your cost of technology is lower than this, you are running a very efficient digital business.
In the early stages of an online retail business, your technology costs can be expected to be higher. That’s because the actual cost to deliver the technology, software solutions and customer support that your business is subscribed to costs a lot more than the fees you’re being charged and they’re effectively being subsidised by larger subscribers on the same platforms.
To work out your total cost of technology, add up the monthly fees for:
- eCommerce platform subscription base fee
- Turnover and volume fees
- Transaction fees
- Marketplace flat monthly fees
- Middleware and plugin fees
- Email and SMS marketing platform fees
- Social media marketing platform fees
- Monitoring software
- Digital security services
- Server hosting fees
- Customer relationship management (CRM) fees
- Enterprise Resource Planning (ERP) fees
- Dealer Management System (DMS) fees
- Fulfilment platform fees (exclude actual shipping fees)
and then divide the total by your monthly turnover.
For example if your monthly turnover was $200,000, and your total technology costs were $8,000, then your total cost of technology is 4%.
Whilst it’s a common goal of business operators and manager to reduce the costs of a business, if you’re running an online business, you can’t afford to cut costs to the detriment of your business functionality, capacity for scaling and volume and the customer experience it enables you to deliver.
The other lever every business has to pull is revenue, and sometimes it’s more sensible to grow revenue through increased sales, strategic product selection, offering product bundles, generating repeat business through loyalty programs and targeted SMS and email marketing, and social media engagement.
Other costs
Other costs to factor into your budgeting for an online retail business may include:
- Researching and sourcing products and suppliers
You may need to travel, buy and review samples, and consult lawyers about any supplier agreements to ensure your interests are well served. - Purchasing inventory
Factor in time from ordering to receiving goods so you can plan reordering to avoid running out of key products. - Renting or purchasing premises to hold stock and fulfil orders
Costs will vary depending whether you are in a business district or not, whether you will run a physical shopfront, whether you will allow customers to pickup orders and the amount of space you will need to hold your stock. Plan enough into the future so that you won’t outgrow the premises too quickly. If you’re renting premises, you will have a cash bond to budget for too. - Hiring, training and remunerating staff
At the very least you will need somebody to pick and pack orders even if you plan to do it yourself to begin with. If you plan on having a physical shopfront, you will need counter staff on site during store opening hours. You’ll also need staff for customer support. - Facilities services and overheads
Electricity, water, cleaning, parking, logistics access, security system, compliance with local council or body corporate bylaws and policies, computers, office furniture and retail shopfitting. - Fulfilment and delivery
You may need to open accounts with a number of carriers or sign up with a versatile shipping aggregator such as Shippit or Starshipit. You will need barcode scanners, label printers, integrations with carrier systems and computer terminals or mobile picking devices. If you’ll be accepting orders from outside your own country, you will need to have carrier solutions in place to deliver and handle border documentation and inspection requirements plus taxes, tariffs and duties in the destination country. - Payment gateway fees
Unless the ecommerce platform you’re on has it’s own gateway, you will need to choose a compatible payment gateway to accept credit and debit cards, plus mobile web payments via Apple Pay and Google Pay. Payment gateway fees can start at 2.4% plus a fixed transaction fee and can be negotiated lower as your sales volume grows. Accepting a wide range of payment methods will encourage more customers to complete checkout, including digital wallets such as PayPal, and buy-now-pay-later solutions such as Afterpay, Zip, Klarna and Humm depending on the customer audience you’re targeting. - Administrative overheads
Business name registration, company registration, tax registration, building and contents insurance, business continuity insurance, product indemnity insurance, transit insurance, workers compensation, superannuation, payroll tax, industry associations, product compliance, electrical testing and tagging and more. It can be a minefield when starting a business, so if you’re not already familiar with the statutory and regulatory requirements for your business, it would be wise to consult an accountant, lawyer, business planner, or all three. - Marketing and traffic strategy
A well designed webstore is futile if nobody can find it. When your webstore is first launched, nobody knows it exists, so you’ll need to invest in a combination of paid and organic traffic strategies including advertising on Google, Facebook, Instagram and TikTok, or at least the channels relevant to your target customers. Search engine optimization is free from the search engines, but takes a long time to build and is likely to be something you’ll need to outsource for the technical knowledge and expertise needed to do it well. Well personalised and targeted email and SMS marketing through segmentation and action triggers can be a powerful force to entice customers to revisit and shop again with you, and share with others. There are many self-professed SEO experts all over the world, but very few have the real experience and credentials to back up their claims. It might cost you a little more, but a Google Premium Partner will get you much better results.
Do what you’re best at. Outsource the rest.
Yes, there’s a lot of moving parts to consider. Running an ecommerce business has some unique complexities and challenges. The bigger your business grows, and the more channels you trade on, the more robust your technology ecosystem needs to be, and the more you will benefit from partnering with accredited agencies that have a track record of success.
Do what you’re good at and outsource things you’re not so good at to others who can do it faster and more efficiently than you.
Written & published July 2024 by Tim Davies, CEO, ZELLIS
Platform fees and rates quoted were accurate at the date of publication. Refer to the website of each platform for current pricing.