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How to start an e-commerce business in India?

With almost half of India’s population having access to affordable internet connections, businesses across industries have found it profitable to shift online for the sale and marketing of their products and services. According to Statista, the penetration of E-commerce businesses in the Indian market was 76.7%. In 2021. The industry, valued at USD 38 billion in 2020, is projected to cross USD 70 billion by the end of 2022.
E-Commerce Business In India
The value of India’s e-commerce market in the year 2021 was $60 billion. It is estimated to surpass $70 billion by the end of 2022. The industry accounts for 0.76% of India’s total GDP.
Lockdowns imposed during the pandemic restricted the mobilities of businessmen and traders in India, compelling them to shift their operations online. Consequently, E-commerce platforms acted as a lifeline for Indian industries and customers alike. Their customer base expanded to over 280 million and revenues grew by approximately 38% between 2019 and 2020.

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What Are The Advantages Of Opening An E-commerce Business In India?

E-commerce businesses have several advantages over offline retailing, some of which are listed below:
  • Low-cost of operations, as you do not necessarily need shops to sell your products and services. You can save your rental costs, maintenance costs, and the costs of legal compliances before renting or owning properties. Certain E-commerce businesses, like Meesho, simply provide a platform for other businesses to sell their products and services and save on the costs of inventories as well.
  • Wide customer base, not specific to a location: Depending on how well you market your products, you can sell them to customers anywhere in the country. Expanding your customer base need not require you to change the location of your business.
  • No intermediaries: Manufacturers can sell their products directly to their target buyers, including end-users or customers using E-commerce platforms. Avoiding intermediaries like wholesalers and retailers allows manufacturers to receive a 100% share in the selling price of products. Additionally, not having intermediaries decreases the cost of products for customers.
  • Potential to earn high profits: Because there are hardly any restrictions on expanding the customer base, E-commerce businesses have the potential to earn higher profits from their ever-increasing customer base.
  • 24*7 services: E-commerce businesses can operate 24 hours a day without the physical presence of workers and staff. This is certainly not possible in the case of physical retail shops. Increasing the time for business operations increases the sale of products and services, thereby increasing the revenues of the business.
  • Customer data: Customers lack the option of providing feedback about products and services sold to them in physical retail shops. This option is available in form of “reviews” on E-commerce websites and is helpful for businesses to improve product quality in the future. Reviews are also helpful for other fellow customers in making an informed decision while buying.
  • Convenient for customers: Customers can avoid visiting shops and place orders for products and services from the comfort of their homes. They can make payments online and receive their orders at their doorsteps within a week. An online mode of purchase is extremely convenient for customers.

Types Of E-commerce Businesses That Can Be Opened In India?

Based on the nature of business transactions, E-commerce businesses can be categorised into:
  • B2B business: Both buyers and sellers are businesses. For example, IndiaMart sells industry-specific machinery and hardware to businesses in the health, pharmaceutical, food, electrical, and a variety of different industries.
  • B2C business: The customer or the end-user buys the products or services sold by a business. Almost all e-commerce businesses operate as a B2C. Prominent examples include Amazon, Myntra, Nykaa, Flipkart, Meesho, etc.
  • C2C business: Customers sell used items to other customers for second-hand use. For example, at OLX, customers can sell used and old products to any interested customer.
  • C2B business: may include businesses that buy products from customers, usually for recycling purposes. For example, Amazon buys old laptops and electronic gadgets from customers in exchange for new ones.

How To Start An E-commerce Business In India?

Owing to the steep and rapid rise of internet users in India in the past few years, E-commerce is increasingly becoming a necessity for businesses across industries, Hence, any new business in India is recommended to be opened as an e-commerce business. A step-wise procedure for establishing new e-commerce businesses in India is listed below:
  • Choose your type of business: You must decide on a model for your business before establishing it. For this purpose, you may choose among B2B, B2C, C2C, C2B, and B2A business models. Deciding your business model beforehand will help you choose your target buyer, and your industry, build a network of distributors and delivery channels, and determine other similar needs for your business.
  • Choose the location of your business headquarters or office: Certain E-commerce businesses which carry out both manufacturing and retail operations need to search for suitable locations to set up their factories and inventories based on the proximity of suppliers of raw materials or finished goods. If the E-commerce business simply provides a platform for retailers or manufacturers to sell their products and services and does not require factories or inventories, the location of its headquarters or office will probably not affect its business operations.
  • Decide the name, logo, and brand for your business: The brand of your business should be based on its nature of operations (merchandise or services), target buyers, and the products/services sold. The name and logo of the business must communicate its brand voice and should not violate any trademark rules to mimic the names and logos of existing businesses (Section 4, Trademark Act 1999). Make sure you register the name and logo of your business as a trademark, to protect its originality and uniqueness. For this, you may avail of the quick and cost-effective services of SetIndiaBiz in Trademark registration for new and existing businesses.
  • Build a Website, buy a domain name and purchase necessary tools: An official website is the most significant tool for running an E-commerce business. All sales, marketing, and payment operations for products and services are carried out through the website only. You would require a web development team to build, maintain and consistently update a bug-free website.
Before you build a website, you must buy a unique domain name for it Domain names are usually extensions of websites with a domain name extension. It can be searched on popular platforms like GoDaddy and Name Cheap, which also provide registration services for domain names. Similar to the name of your business, your domain name must also not violate any Trademark rules and mimic the domain names of existing businesses.
You also need to purchase the necessary tools and software for operating your e-commerce businesses, the most popular ones include Shopify, BigCommerce, Woo Commerce, Big Cartel, and Magneto. These tools facilitate E-commerce stores, inventory management, and marketing for individual business owners, merchants, and small and large enterprises.
  • Stock inventory and build a supply chain, if required based on the nature of business operations.
  • Build delivery networks: Build your own delivery networks throughout India or outsource delivery services to 3rd parties to deliver products and services at your buyer’s doorsteps.
  • Choose your legal status: E-commerce businesses may get incorporated as LLP, partnerships, private or public limited companies based on their scale of operations. Usually, small businesses register as partnership firms or LLP as they run operations on a smaller scale, receive lower investments and earn lesser profits. Therefore, sharing the liability of the business is advisable for them. However, e-commerce businesses that run operations at a larger scale and earn huge profits, register themselves as public or private companies.
  • Register and incorporate your company: To operate as a separate legal entity, you must register your business and apply for its incorporation. SetIndiaBiz has years of professional experience and expertise in providing registration and incorporation services to new and existing businesses.
  • Open a current bank account for your business: E-commerce businesses must have separate current bank accounts to facilitate online payments and transactions on the sale of their products and services. Such accounts must be enabled with net banking facilities to enable returns refunds to buyers when required.
  • Get necessary approvals and licenses: Like any other business, E-commerce businesses need to obtain certain approvals and licenses before beginning their operations in India. These include obtaining a PAN card, GST registration, obtaining EIN number, obtaining a license under the Shops and Establishment Act, Business Operation License, Industry-specific license, Home Occupation Permit for running the business from home, Seller’s permit, ESIC, EPF, and license for employing contract labour. You can avail of the services provided by SetIndiaBiz regarding all post-incorporation legal and tax compliances, including getting necessary licenses and approvals for your E-commerce business.
  • Collaborate with payment gateways and banks to enable online payment using UPI, net banking, debit/credit cards, and e-wallets on your e-commerce website.
  • Strategize a plan and draft a policy for your business: Before launching your business, you must draft your business policy containing the terms and conditions, privacy policy, disclaimer, return, refund, and cancellation policies. You must also prepare a detailed business plan to help you overcome present and future challenges.
  • Build a marketing channel for your business: E-commerce businesses market and promote their products mostly on digital and social media platforms. However, print and broadcast media are also effective channels for marketing products by e-commerce businesses.
  • Build Customer feedback and grievance channel: The advantage of selling and promoting your products and services online is that the customers actively share their experiences of using the products and services. This helps the businesses resolve customer grievances in no time, and understand consumer needs and demands to improve and upgrade the quality of products and services in the future.
  • Launch your business.

How Can SetIndiaBiz Help?

SetIndiaBiz specializes in providing company registration and post-registration services to all kinds of businesses, including e-commerce, for the past several years. Our services are backed in quality by a team of professional and legal experts in the field, and our costs are most convenient for clients inside and outside India. Besides services, we also offer guidance to our clients with respect to legal and tax compliances post-incorporation. You can check out the details of our services on our official website

Conclusion

The growth of e-commerce businesses in India is driven by high internet penetration, a rapidly increasing number of smartphone users, the development of next-generation connectivity infrastructure, and affordable data plans. The digital consumer base in India is growing every day and businesses are shifting online to cater to their demands. As this trend continues advancing, starting an e-commerce business is becoming more and more fruitful in India.

About Setindiabiz

Setindiabiz is an organized team of experienced CA, CS, & Lawyers, duly supported by a pool of trained accountants & paralegal staff that provides quality & affordable compliance services to startups & small businesses in India. The views, statements and recommendations expressed in this article or post are only for the sole objective of providing information, and it does not constitute professional advice or recommendation of the company. Neither the author nor the company or its affiliates accepts any liability for any loss or damage arising from any information in this article or any actions taken in reliance thereon.
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