Starting an eShop in 2023 - The Most Comprehensive Preparation Checklist
In recent years, the eShop market has become more vibrant than ever before, and more and more people are choosing to start an eShop to create their own business. It is often said that opening an eShop is low-cost, but what are the actual expenses involved? What preparations need to be made in advance? Is it necessary to apply for business registration? What other considerations are there? Let ebixPRO guide you through each step and tell you the correct approach to starting an eShop in 2023!
Contents - Guide to Starting an eShop in 2023
1) Advantages of Starting an eShop over a Physical Store
2) What to Note When Starting an eShop
3) Operating costs for an eShop
4) Complete Checklist for Starting an eShop
Advantages of Starting an eShop over a Physical Store
1) Low start-up costs
Starting an eShop has low costs, and anyone, whether a student or a working professional, can establish a business and earn extra income with just a computer or phone. If you are a full-time entrepreneur, opening an eShop is a great choice as it does not require expensive storefront rent, utilities, or employee expenses like a physical store. Even if there is no business at the beginning, it won’t create too much pressure on your life.
2) Time flexibility
The biggest advantage of running an eShop is the flexibility of working hours, allowing you to manage your business anytime and anywhere. If you are a working professional, you can use your spare time to operate the eShop, process orders, and respond to customer inquiries. Moreover, the most active time for eShop customers is usually in the evening, so managing an online business won’t affect your daytime job.
3) Business can be conducted from anywhere
Opening an eShop is not only free from time constraints but also free from location constraints. If your shop’s business requires you to go abroad to purchase goods, an eShop can fully accommodate you. Even if you are away from home, you can manage orders, contact customers, and upload products. Some stores will even open a “international direct delivery” page on their online store, allowing customers to directly select non-local products.
4) Caters to the era of big data, easier to collect customer data
In recent years, various industries have undergone digital transformation, not only to cater to people’s consumption habits in the new normal but also to adapt to the business model of the era of big data. The most amazing thing about online stores is that they can record every detail of customer behavior data, allowing stores to analyze and design targeted promotional strategies to increase sales!
5) One-stop promotion and sales
Any business needs market promotion, and the advantage of online stores over physical stores is the ability to promote and sell products online in one go. After placing an online advertisement for the store, customers can immediately click and enter the store to purchase products, making the process more convenient and efficient than returning to a physical store.
What to Note When Starting an eShop
Do you need to register your business when starting an eShop?
Many people think that only physical shops need a business registration certificate (BR), but the truth is, if you are running a business, you need to register it with the government. According to the Business Registration Ordinance (Chapter 310), “unless exempted, every person carrying on a business in Hong Kong must apply for business registration with the Business Registration Office under the Inland Revenue Department.”
You must apply for a business registration certificate within one month of starting your business. Failure to do so may result in a fine of up to HKD 5,000 and/or imprisonment for up to one year. If you have been operating for more than 12 months without registering, the Inland Revenue Department can collect all the fees owed retroactively. In fact, when you choose to open an online shop on an e-commerce platform, the platform will require you to upload a valid business registration certificate. Even if you only use an Instagram account, when you convert it to an Instagram Business Account, you need to upload a valid business registration certificate to access more features. You can refer to the checklist for starting an online shop for the application process.
Do You Need to Pay Taxes When running an eShop?
Hong Kong adopts a territorial source principle for taxation, which applies to both physical shops and eShop. As long as you are doing business in Hong Kong and receiving profits from Hong Kong, you need to report your income and pay profits tax. However, if your source of profits is outside Hong Kong, you do not need to pay profits tax. If you fail to report your income or evade taxes, you may be fined up to HKD 10,000 and may also have to pay up to three times the amount of tax undercharged.
Do I need to open a business bank account for my eShop?
As a novice in e-commerce, using a personal bank account to receive payments may not violate any laws, but it can easily lead to various problems. Firstly, it can cause confusion in bookkeeping as the number of customers purchasing products increases. It becomes difficult to distinguish personal funds from the income received by the eShop, and the frequent occurrence of customer returns and refunds can further complicate the accounts. This leads to another issue, which is difficulty in reporting taxes.
In addition, popular payment methods such as Payme, FPS, Alipay, or credit cards are available for online stores. It is recommended to use a company bank account to maintain customer privacy, as the recipient’s real name will not appear on the payment screen. Opening a company account for an online store has only benefits and no downsides. Details on the application process and fees can be found in the e-commerce checklist below.
What products should I pay special attention to when selling online in Hong Kong?
1. Food products
If your eShop sells food products, you should be aware if they are regulated under the Public Health and Municipal Ordinance. In addition, you must apply for a restricted food sale permit, and the permit holder must clearly provide the relevant information of the permit on the website, including the category and permit number of the permit, the restricted food categories that can be sold, and the business address of the permit holder, which is usually the same as the address on the business registration certificate.
2. Cigarettes and alcohol
According to the “2017 Dutiable Commodities (Amendment) Bill” and the “Smoking (Public Health) Ordinance,” online stores are prohibited from selling tobacco products, cigars, and alcohol to minors. To identify the customer’s age, it is recommended that online stores use credit card payment.
Do I need to provide truthful product descriptions on my eShop?
Hong Kong has the “Trade Descriptions Ordinance,” which prohibits unfair trade practices, including false product descriptions, misleading omissions, intimidating business practices, and bait advertising. If your online store sells nutritional supplements or beauty products, such as those claiming to have whitening or slimming effects, you must be careful when filling out the product descriptions and cannot exaggerate their effectiveness.
Operating costs for an eShop
1) Platform fees
There are many e-Commerce platforms in the market, each with different fees. When choosing an online platform, you can consider the store’s required functions and select a suitable plan. The following are different online store plans for reference.
ebixPRO
Basic Plan: Free forever
Advanced Plan: HKD$4,885 per year
Professional Plan: HKD$8,255 per year
2) Domain name fee
To establish a good brand image for an online store, in addition to having an attractive website appearance, a memorable domain name is also necessary. The general domain name fee ranges from $10 to $20 USD, and some unpopular domain names may only cost a few dollars, while some more popular choices may require higher prices.
3) Promotion fee
All businesses need promotion to gradually establish brand awareness and continue to generate sales. Online store promotion generally involves Facebook, Instagram, and Google.
Facebook and Instagram ads are mainly targeted at actively reaching target customers, and the category, cost, and format of target customers can be decided by the store owner. Generally, a promotion fee of no less than $100 per day is recommended for more effective results.
Google can choose to place keyword ads, website banner ads, and YouTube video ads, and different ads have different pricing models. The most common keyword ads will vary depending on the competitiveness of the keywords. Generally, a few thousand Hong Kong dollars per month can get started.
In addition to this, eShop can also consider traditional store promotion methods, such as TV commercials, media coverage, and YouTuber endorsements.
4) Logistics Costs
Logistics is one of the necessary expenses when running an online business, mainly comprising the costs of picking up products from suppliers and shipping to customers.
The price of logistics fees varies depending on different logistics providers. Currently, most online shops offer free shipping for customers who spend a specified amount to attract more sales. In Hong Kong, SF Express is the most basic logistics option, with a starting delivery fee of HKD 30 per order.
Complete Checklist for Starting an eShop
1) Rename the Shop
The first thing to do when starting a business is to give the shop a good name. The direction of the name change can be based on the shop’s image and positioning. To check if the name is already used by other companies, you can visit the Companies Registry website >> https://www.icris.cr.gov.hk/csci/ for a search.
In addition, online shops usually have an Instagram account, so you can also use Instagram’s search function to see if other shops are using the same name.
2) Apply for Business Registration Certificate (BR)
After the shop name has been changed, you can proceed to register the business. Applying for a Business Registration Certificate is actually not complicated at all. You can make an appointment on the Business Registration Office website and then apply in person at the following address: Business Registration Office Address: 4/F, Revenue Tower, 5 Gloucester Road, Wan Chai, Hong Kong.
Alternatively, you can fill in the IRBR194 form (https://www.ird.gov.hk/eng/pdf/irbr194.pdf) and email it to the Business Registration Office (taxbro@ird.gov.hk). The Business Registration Office will then send the application form to you by mail. After filling in the form, you can send it to the following address: PO Box 29015, Gloucester Road Post Office, Hong Kong.
Alternatively, you can apply for business registration on the Hong Kong Government’s “GovHK” website under “eTAX.” When registering, you need to provide a business address. If you do not have a physical shop address, you can provide your personal address. The entire application process takes about 10 minutes and can be paid instantly by credit card.
The annual fee for a Business Registration Certificate is HKD 150. The government will automatically send renewal documents to the registered address before the expiration date. You only need to pay the renewal fee to renew for another year.
3) Open a Business Bank Account
Not everyone knows how to open a business bank account. If you establish a limited company through an intermediary, they usually help you connect with a bank and prepare the relevant documents for opening a bank account.
However, if your shop belongs to an unlimited company, you need to prepare the following documents:
• Business Registration Certificate
• Identification documents
• Address proof
• Tax jurisdiction and tax identification proof
• Business proof (e.g., orders, delivery notes, office rental agreements, etc.)
In addition, banks may have a minimum deposit requirement ranging from HKD 10,000 to HKD 50,000. Some banks also charge a monthly service fee. It is recommended to compare several preferred banks first and then make an appointment for application by phone.
4) Logo Designing a Brand Logo
With the business registration certificate and company bank account in place, it’s time to start working on the branding. The birth of a brand starts with the logo!
Designing a logo cannot be taken lightly as it is the core of the brand and reflects its image. It is recommended to entrust this task to a professional graphic designer. Generally, designers will first understand the client’s business and positioning, as well as their preferences, and create a suitable design. Prices start at around $3000, depending on how many design options are wanted and whether additional fees are required for designing items such as cards or other brand-related materials.
5) Market Research
Before selecting products to sell on the online store, it is important to conduct market research! A simple approach is to first understand if there are any competitors in the target market, their sales model, pricing, advertising methods, and so on, and then evaluate your brand’s positioning.
For a more in-depth approach, a market research company can be commissioned to survey specific groups of people through questionnaires or interviews, to understand their thoughts and develop a feasible sales plan.
6) Establishing an eShop
When establishing an eShop, it is important to first select a suitable e-commerce platform. Different platforms offer different services, so it is best to choose a platform that offers a free trial, which can help to understand the backend operation.
Additionally, it is recommended to choose an e-Commerce platform that provides real-time customer service and quick response times, so that any issues encountered during the process can be resolved quickly and users can feel more at ease.
Furthermore, it is important to select a platform that allows for flexible design of the online store interface, so that a unique and brand-specific store can be established.
ebixPRO offers a permanent free plan, allowing users to immediately establish an eShop. The backend operation of the eShop is simple and the interface provides a wide range of options, allowing users to freely add banners, images, videos, and more, with full control over the size and color. Additionally, their customer service personnel are highly responsive and never neglectful!
7) Take product photos and prepare text materials
Once the products have arrived, it is important to take photos of them one by one. While you can use online images, customers may be hesitant to purchase without seeing the actual product. Real product photos can help customers better understand the product and increase satisfaction with their purchase. It is recommended to take two types of product photos:
• Staged photos (with background and props)
• Product photos (with a white background that can be removed)
If it is a fashion store, consider taking photos of models wearing the clothes. It is best to indicate the model’s height and the size they are wearing on the product page, which can help increase sales.
In addition to photos, the text on the online store is also important material. A good eShop will provide detailed descriptions for each product, allowing customers to fully understand the product and its features without the need for customer service assistance.
When you have prepared the above items, your eShop is ready to go!
Opening an account on the ebixPRO e-commerce platform only takes 1 minute and is simple and convenient. The platform supports a comprehensive range of practical functions, and all the features that other e-commerce platforms charge for are free on ebixPRO. Don’t hesitate, open an account now!
Author: ebixPRO Team
Date: Feb 20, 2023