Have you heard about Max Hayden ― the 16-year old high school student who brings in millions selling on Amazon? It’s an inspiring story, especially if you’re considering starting your own business. There’s huge potential to make money from e-commerce, especially with the current shift toward online buying.

When COVID-19 hit, it forced people to work and study from home throughout much of 2020 and into 2021. This led to spikes in purchases for many items, including items like outdoor sectionals, chaise lounges, and jigsaw puzzles.

That demand helped retail giants like Walmart and Amazon and individuals like Max realize record profits during the pandemic. Are you wondering how to get a piece of the e-commerce pie? You’re not alone. In this guide, you’ll learn:

  • The e-commerce revenues per industry in the U.S. and globally
  • How e-commerce companies make money
  • Expected earnings for a new e-commerce business
  • How long does it take to turn a profit
  • How to calculate your earnings

What’s the E-Commerce Revenue Per Industry in the U.S. and Globally?

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In 2020, the e-commerce market was estimated at $10.36 billion and is expected to reach $27.15 trillion by 2027. Post-pandemic, there’ll be an even stronger demand for online shopping thanks to the convenience of e-commerce and changes in consumer behavior. E-retail sales accounted for 18% of global retail sales in 2020 and are expected to reach 21.8% in 2024.

Online niche-specific marketplaces like Uber and Airbnb — once innovative business ideas — grew quickly over the years. Midway through 2020, there were even more profitable e-commerce niches that appeared in different industries like:

  • E-learning: Estimated to reach more than $370 billion in 2026.
  • Retail: Projected global retail e-commerce sales to double at $6.54 trillion in 2023.
  • Grocery: The strict nationwide lockdowns and restrictions in the United States led to a 54% growth in e-commerce grocery sales and is expected to surpass $100 billion in 2021.
  • Food delivery: The online food delivery market is scaling rapidly and is projected to reach $200 billion in revenue by 2025.
  • Rentals: As a niche industry, the online rental marketplace offers tangible business opportunities with significant revenue streams. For instance, the U.S. equipment rental market is expected to reach $59.4 billion in 2021. Also included in this rise is the global ride-sharing market led by Uber, which is forecasted to reach $185.1 billion by 2026.

U.S. retail e-commerce sales were expected to hit $908.73 billion in 2021 and are anticipated to reach $5.4 trillion in 2022. Online shopping is now the most popular online activity in the world as the global e-commerce market crossed the $26 trillion mark in 2020.

Countries like China, which are leading in e-commerce, are expected to stay in the lead through to 2025, owing to:

  • The shift in purchasing power from the U.S. and Europe
  • An increasing number of Asian consumers with more purchasing power
  • More access to the internet, especially on mobile devices

The Chinese market is expected to grow at a rate of 8.2% to reach $1,996 billion in 2025. Of the three major regions — China, U.S., and Europe — the Chinese market is expected to show the largest growth rates considering it surpassed the U.S. less than a decade ago.

The U.S. e-commerce market was forecast at $843.15 billion in 2021 — less than a third that of China’s — and its market size growth rate also pales in comparison. The United Kingdom comes third after China and the U.S. with total e-commerce sales reaching 169.02 billion in 2021.

Japan and South Korea wrap up the list of the five-largest e-commerce markets with estimated e-commerce sales of $144.08 billion and $120.56 billion respectively. Out of the five biggest e-commerce markets, three are in Asia, which makes up 62.6% of the global e-commerce size. It’s no wonder the Asian Pacific region is a critical market for e-commerce store owners to focus their efforts on.

In Africa, online shopping revenues are estimated to increase significantly to around $46.1 billion by 2025 with electronics, media, and fashion being the most valuable sectors.

E-Commerce Revenue in Africa
Source: Statista

India is the fastest-growing e-commerce market followed by Spain. That’s because digital retail in these countries is developing rapidly, thanks to the constantly improving online access and cheap mobile broadband connections.

How Do E-Commerce Companies Make Money?

For many businesses worldwide, strict restrictions and lockdowns drained revenue, and many retailers filed for bankruptcy during the outbreak. As consumers moved to online shopping during the pandemic, different players gained a deeper foothold in e-commerce, leading to a strong uptake across regions.

Mercado Libre — an online Marketplace in Latin America — sold twice as many items per day in the second quarter of 2020 compared to the same period in 2019.

Jumia, an African e-commerce platform, also reported a 50% spike in transactions during the first six months of 2020.

But how did these e-commerce businesses make so much revenue online? They used some proven e-commerce strategies:

  • Fixed subscriptions: Host products on e-commerce platforms for a fixed subscription rate.
  • Commissions: Charge registered sellers a certain percentage — usually 5% to 20% — commission based on the products they sell.
  • Logistics and shipping: Charge delivery and shipping fees. E-commerce brands like Amazon and Flipkart use this as an additional source of revenue.
  • Cobranded banners: Sell cobranded banner opportunities on your e-commerce site’s home page besides physical products or targeted search results. Flipkart uses this strategy in its partnership with Xiaomi to generate ad revenue.
  • Offer unique seller programs: Amazon thrives in this space and earns fixed percentage fees through its seller program.
  • Rent or lease properties: This strategy involves leasing or renting out your infrastructure to boost profit margins. For instance, Amazon serves enterprises and developers through its warehousing or Amazon Web Services (AWS) system. They provide a broad set of global compute, database, storage, and service offerings.
  • Publishing service: You can generate value for your customers and grow your business through publishing. Amazon, for example, lets authors and publishers choose a 70% royalty option and provide books through Amazon Publishing and Kindle. App developers, filmmakers, and musicians also publish and sell content on the platform.

What Can a New E-Commerce Business Expect to Earn?

Woman Using a LapTop
Source: Pexels

The old “if you build it, they’ll come” phrase doesn’t work in e-commerce. At least, not with the hundreds or even thousands of competitors competing for your same customers.

So you need a strategy to build your online visibility to drive traffic and sales. With consistency, you can steadily raise your income from a few hundred per day to thousands, or more.

Earnings Timeline — How Long Does It Take To Turn a Profit?

To answer this question, let’s look at Max Hayden’s reseller business.

Max’s current e-commerce reselling business started in 2019 with a $300 investment, selling popular resale products like sneakers. Today, many items he sells online can fetch a markup of up to 400%, especially if they’re in high demand.

To ramp up his side gig, Max focused on reselling the products on online marketplaces like Amazon, Facebook Marketplace, and Craigslist, making six-figure profits in the process. He’s been able to sell a total of more than $1.7 million worth of products as an Amazon Marketplace seller in 2020, pulling in more than $2 million in revenue. After accounting for the products’ original retail prices and shipping costs, Max said he turned roughly $110,000 in total as profit for the year.

Through the end of June 2021, he saw a little more than $500,000 in revenue and turned a profit of $30,000 to $40,000. Max says he had to temporarily shut down his business for a few months to focus on his schoolwork before ramping back up in the summer. Like most businesses, there’s no telling the exact length of time it’ll take to turn a profit.

You could use social proof-positive product reviews, high numbers of followers, and authoritative content to put the odds on your side. But don’t expect to earn a profit immediately. Hopefully, you’ll break even within a handful of months. If you sell services online, you can see profits faster because there’s little to no startup cost, which means all the money goes into your bank account.

How Do You Calculate Your Earnings?

Once you start making sales, you calculate your profits using the following:

  • Gross revenue: Multiply the price of your product by the number of products you’ve sold
  • Net revenue: Multiply the cost of acquiring the product by the number of products you’ve sold, and then subtract the result from the gross revenue
  • Profit earned: Subtract your marketing budget from your net revenue

You can also use simple monthly profit calculators available online to calculate your earnings.

Build a Profitable E-Commerce Business

Selling goods online and services online is an excellent way to increase your income. You can do it on the side of a full-time job or go all-in full-time. Whatever you decide, make sure to have a plan, do your research, and prepare for the hurdles ahead.

Before you know it, you may earn enough to quit your day job or even start a second e-commerce company. If you’d like to learn more about starting an e-commerce business, then check out “How Much Does It Cost To Start an E-Commerce Business.”

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