Five Things to Know about E-Commerce
During the pandemic, many people either turned to e-commerce or moved their operations (all or in part) online to make income. This modern solution is a good way to engage customers, but before you make the leap, there are some important things to know.
1. It’s a very profitable market in Canada
According to Statista, e-commerce sales accounted for nearly $1.85 billion CAD in 2019, and more than 28 million Canadians made purchases online. E-commerce revenue is expected to surpass $33 billion USD by 2024.
2. That growth makes it an extremely competitive market
The barriers to entry for e-commerce are low. Some retailers operate out of their homes and take advantage of Amazon FBA or drop shipping. Others have their own warehouses and logistic setups. No matter the size of the business, opportunities for retail sales online abound, making competition one of the biggest hurdles to overcome.
3. Canada Revenue Agency (CRA) is very interested in your success
To CRA, income is income. Whether you are selling small batches of homemade jewelry locally or have a massive national organization selling around the world, if you are making money, you must report it at tax time. When you make more than $30,000 a year on your sales, you need to collect and remit GST/HST. No matter the size of your operation, you should set up My Business Account early on so you can easily interact with CRA as your business grows.
AF Accounting did a series called the Amazon Seller’s Guide to Canadian Taxes; this series is applicable to all online retailers including those on Shopify, eBay, Kijiji, and private storefronts. View it here: Part 1, Part 2, Part 3, Part 4, Part 5.
4. E-commerce has a broader definition than you think
E-commerce is not just about online sales. CRA defines e-commerce as retail transactions that take place by phone, fax, automated banking, credit/debit cards, television shopping, private computer networks, any business handled over the internet, and even the “delivery of government services.” When thinking about how to classify your business, if it has a digital component you may fall under (in part or in whole) e-commerce.
5. You can simplify your operations and accounting with the right software
How do you manage to break into this profitable sector despite the competition and complicated tax structure? How do you remain compliant with CRA and track your daily sales across multiple markets and currencies? The right software makes it easy. Xero is a powerful program for e-commerce sellers, and A2X is a software that is compliant with your Amazon Marketplace account. Programs like these make the accounting and bookkeeping side of your business easier and less prone to errors.
Modern problems require modern solutions. AF Accounting is the nimble, forward-thinking firm that has invested in your e-commerce success. We have digital, cloud-based programs for e-commerce sellers, as well as remote CFO and other accounting services to help you succeed. If you operate an e-commerce site and are based in Canada, learn how our remote services with real-time help can take your business to the next level and help you stand out among the competition.