Step by step guide: How to start your eCommerce business in Hong Kong

12 Minute Read

As a result of digitalization, eCommerce has evolved to make discovery and purchase of products through online retailers and marketplaces easier. Large corporations, small businesses, and independent freelancers have all greatly benefited from eCommerce. According to statista.com, revenues from eCommerce are expected to grow to 5.4 trillion US dollars in 2022. 

As you might already know, e-Commerce (electronic commerce) simply refers to the buying and selling of goods or services through the internet. It includes the transfer of money and data to complete transactions. eCommerce is often used to describe selling of physical products online, but as a matter of fact, it can describe any kind of commercial transaction facilitated by the internet.

By adopting eCommerce, users are able to sell online at a larger scale that was not possible with traditional offline retail. This article will tell you everything you need to know about starting your eCommerce business in Hong Kong, so you can take advantage of its trillion dollar potential market.

Overview:

Why should you start your eCommerce business in Hong Kong?

As witnessed and proven by the recent global pandemic, the internet is arguably the single most important aspect of modern day society, and it’s no different in Hong Kong. E-commerce in Hong Kong has seen rapid development as change in consumption patterns of shoppers have led retailers to set up an online presence to survive. 

Hong Kong’s revenue from eCommerce is expected to see a growth rate of 10.5%, and by 2025, a projected market volume of USD $11,308 million. With steadily increasing e-commerce sales, Hong Kong’s tax advantages, and its rapidly growing market, there is no better time than now to start an eCommerce business. 

There are presently five common types of eCommerce business models you should know:

Business to consumer (B2C):

This type of eCommerce is simply when a business sells goods or provides a service to consumers. E.g Tmall.

Business to business (B2B):

This type involves the sale of goods or services to another business. Unlike B2C, there is no direct contact with consumers. Goods such as softwares and products mostly fall here. E.g Alibaba.

Consumer to consumer (C2C):

C2C eCommerce refers to a consumer promoting their goods or services to another consumer for sale. E.g Taobao.

Consumer to business (C2B):

C2B e-commerce happens when an individual sells their own products or services to a larger business or organization. E.g An individual that sells their services on Upwork.

Direct to consumer (D2C):

This form of e-commerce model is still relatively new and it means a brand sells directly to consumers without retailers or distributors. E.g H&H Group.

That being said, depending on your business type, goals and needs, there are still so many things to consider in choosing your eCommerce business model.

Steps to starting an eCommerce business

As the purpose of this article is to give you enough information on how to start an eCommerce business in Hong Kong, it is crucial we talk about the steps to take in creating a successful business.

1. Decide on a product

If you are an aspiring entrepreneur, you must have considered intense competition and the challenge that every profitable thing you could ever sell is already on sale by other people. Truth be told, this worry is well founded, but the good news is there are still plenty of million-dollar opportunities to be taken. Here are some ways to get high value products to sell in your online store.

  • Start with what you have

    It is always better to start with ideas that have previously held your interest before thinking of other products and niche ideas to specialize in. It might be a product or idea you’ve considered for years; take a second look at these ideas and give it a shot.

  • Identify and provide solutions to pain points

    Providing solutions to customer pain points will always be an effective way to develop a product people readily want. All you need to do is to look for means to address poor or frustrating experiences with the current selection of available products. You should also consider challenges you face yourself as a consumer and think of ways to solve it as a seller. Small, frustrating experiences could be what you need to create a successful eCommerce business.

  • Follow your passion

    While it’s true that choosing a product or niche based on your personal interests and passion can be quite tough , it does not necessarily spell disaster for your online store. In fact, you’ll be better equipped to stay motivated and face challenges in your business since you’re passionate about what you’re selling. If well channeled, your passion can birth a unique business idea that is extremely profitable.
  • Look to capitalize on trends early

    Recognizing a trend to capitalize early can make all the difference for new eCommerce businesses. As a new online store, you will be able to instantly carve out a place in the market and establish yourself as a force. However, while trying to do this, it is important you don’t confuse a fad with a genuine trend.

    A fad is an intense but short lived rise in the interest of a particular thing. Building your eCommerce business around a fad means demand will eventually die down. A trend is much more steady as it marks the general direction something is going. Follow top consumer product trend publications for great ideas of products based on trends.

  • Use keywords to find opportunities

    Organic traffic from search engines is an extremely important channel for marketing. By strategically looking for products to sell based on search queries, number of searches per month, and overall competition for those searches, you are already one step ahead of competition.

    To pull this off, you need a basic understanding of keyword research and search engine optimization. However, be careful not to rely too much on search engine traffic as Google’s algorithm is constantly changing. If you want to find products to sell based on popular search terms, here are some tools you can use: Keywords Everywhere, Sonar, Alibaba Hot Keywords and Industries Keywords.

  • Capitalize on your professional experience

    Do you have professional experience with a product or service that gives you an edge over the average person? Or maybe your working experience has given you thorough knowledge about a particular industry.

    A great business strategy would be to start an online business with this advantage by turning your expertise into an ecommerce venture. Professional experience and expertise of this nature is difficult to replicate.

  • Look for products with higher profit margins

    Before choosing a product for your online store, consider the profit margin. Products that attain higher profit margins are those that cost less. They also give the opportunity of a low-risk start to selling online. Costs like promotion and shipping are all things that should be considered in line with the cost of creating a product.

    Looking for low-cost items that will generate a high return on investment will do your business a whole lot of good.

2. Find your target market

Finding your target audience is crucial to the success of your eCommerce business. By assessing and evaluating the following points, you’ll be able to focus on the part of your target market that is actually interested in your products and services; this will save you from trying to target everyone. Only by focusing on people who are most likely to buy from you will you be able to attract the right people to your eCommerce store. How can you do this?

  • Know your current customers

    One of the most effective ways of finding your target market is by looking at your current customers or those of other firms in the same industry. Find out their pain points and what they want from similar products. By doing this you get a definite picture of what type of customers you need, and then you’ll know how to start an eCommerce business that solves these problems.

  • Target those your competitors are leaving out

    It’s common for small eCommerce businesses to limit themselves by not considering the competition. While this is a concern, a smart thing to do is to focus on the customers your competitors are not marketing to. By doing this, you can successfully create a monopoly with these potential customers who are overlooked by others.

  • Understand demographics and psychographics

    Demographics involve statistical factors like age, gender, and occupation that might affect the decision to buy from your eCommerce store. Psychographics refers to classification of potential customers through their behavior and personal interests. Understanding these things reveals how people make purchase decisions. You can use this knowledge to run a profitable business.

3. Decide on your business model

eCommerce can take on different forms, based on the transactional relationship you want to pursue. Choosing the right e-commerce business model for online stores might be a little tricky. You should know the model that best fits not only your target niche, but also your resources and capabilities.

Examples of eCommerce models:

  • Private Label:

    This is especially useful in cases where the eCommerce entrepreneur is not capable of producing their products internally. Instead, they order from manufacturers, then market and sell the products under their private label. 

  • White Label:

    White label is a business model where the manufacturer is in charge of product specifications and decisions, while the vendors control package design and sales.

  • Dropshipping:

    Dropshipping is brilliant for entrepreneurs with little or no capital. Products are sold online by eCommerce businesses without actually having the products on hand. It is only when orders are placed that the items are then purchased from suppliers who are also responsible for delivery of such products to the buyers.

  • Print-On-Demand:

    For this business model, different products like shirts, mugs, cases etc. are simply sold with custom designs. How this works is that once a customer places an order, the selected design is sent to a third-party manufacturer who prints it on a product, packages, and delivers directly to the customer. 

  • Wholesaling:

    In this business model, an eCommerce store offers products in large quantities at lower rates.

4. Come up with a business plan

The next thing to do before starting your eCommerce business in Hong Kong is to come up with your business plan. A business plan not only helps to bring your ideas and thoughts together, but it also tells you what to prioritize, how to avoid mistakes, and the best way to effectively win over new customers.

As an emerging eCommerce business owner in Hong Kong, drawing up a proper business plan might be quite tricky. Your online store will reap plenty of benefits by getting expert help on drawing up a business plan.

5. Establish brand identity

Figuring out how to start an eCommerce business is not complete without coming up with your brand identity. This is how and what you want your business to be recognized for. It includes the name of your business, your design, and your logo that will set your online business apart from competing eCommerce businesses. Here are a few steps to take to establish your eCommerce brand:

  • Name your business

    As it is the center of your brand’s identity, naming your eCommerce store should be done with utmost care. And ideally, before you choose a name or domain name for your eCommerce business, you should consider how your name will make customers feel, if it portrays your business idea and if you should include keywords for SEO.

    Also, as ideas for names come to you, be sure to check for the availability of eCommerce brand names you’d love to use on Hong Kong’s Companies Registry’s CyberSearch Centre. You don’t want to choose a name that’s already taken!

  • Create your logo/brand personality

    The next step is creating a simple logo. There are several available options for doing this, as you can either use software that requires little experience and skill or outsource to get a logo tailored with your business in mind.

6. Incorporate your business

There are various types of business entities you can operate as in Hong Kong. If you want to form your eCommerce business under a name different from your own, why not register your business as a Limited Liability Company (LLC)? By doing this, you protect yourself from the risk of bankruptcy that you’re exposed to by running your eCommerce business as a sole proprietorship.

Incorporating your business is a lot of paperwork and can be time consuming for the solopreneur. As such, you should consider
leaving the process to professionals.

Another thing you shouldn’t overlook in running your own eCommerce business successfully is a corporate secretary. Hiring a corporate secretary takes away the burden and worry you might have that you are doing something wrong or breaking a law in Hong Kong. And not just that—saddled with making sure your business runs efficiently and effectively, hiring an efficient corporate secretary in Hong Kong is the best step to take. 

If you’re thinking about smoothly incorporating your company in Hong Kong, you should go through the Pre-incorporation Checklist made available by professionals at Sleek before you start the process.

7. Get your accounting and bookkeeping in order

People learning how to start an eCommerce business often make the mistake of paying little attention to the accounting aspects of their business. Ultimately, this causes problems for the online store owner. Another major reason your accounting and bookkeeping must be in order is for the sake of taxes. 

True, Hong Kong has a business friendly tax system, but preparing your Annual Accounting Report and having your accounts audited must be done before submitting a tax return. You need a professional accounting service that will assist with a comprehensive breakdown of how to get the best out of Hong Kong’s tax system.

How to scale your eCommerce business with calculated steps

Scaling simply refers to advancing your eCommerce business in such a way that your business survives, grows, and remains relevant in the foreseeable future.  Some things you can do are:

Understand your customers’ journey

What this means is analyzing how your customers arrive at the decision to patronize you. By understanding your customers’ journey, you’re able to figure out what works in various conditions and you’re able to make necessary adjustments.

Engage influencers to market your product

The power the influencers possess is that held by trust. By engaging the services of influencers to market your product, you’re able to get more customers. If your product gets posted or mentioned, there’s every likelihood that the loyal followers of such influencers will flock to your online store.

Automate as much as possible

One important key to grow your eCommerce business is by automation. By automating you can deal with so much more, all in a way that makes your operations more efficient and effective. Consider outsourcing to experts that know which aspects to automate that will bring dynamic growth to your business.

Other eCommerce items to consider

Special licenses your eCommerce business may require 

To legally operate your eCommerce business in Hong Kong, ensure that you have all necessary licenses and permits as required in Hong Kong. To check and confirm you’re doing everything right and by law visit GovHk.

What platforms to sell on 

eCommerce Marketplaces

This refers to websites that sell for multiple sellers. There is a wide variety that equally attracts a wide customer range. They are simple to use with everything needed to carry out transactions already in place. Examples of eCommerce platforms in Hong Kong are Tmall, JD, Taobao and WeChat.

Your own domain

If you have your own domain, only two parties are involved in the sale process – the seller and the buyer. In other words, a single vendor sells to multiple customers. Due to the fact that you would need to manage such a website, it is always a good idea to make sure the product is right for this.

Typical ecommerce websites that you can host your domain on in Hong Kong are WooCommerce and Shopify.

Marketing and public relations (PR)

Marketing is the direct drive of traffic to a business to increase profit e.g through social media marketing and email marketing. PR, on the other hand, creates a long standing image that will determine how successful a business will be, e.g an influencer who constantly speaks about your product.

Balancing and making use of these two in the right combination can go a long way in determining the lifespan of your online business.

Logistics

Typically, this is carried out by professionals that ensure your logistics are set up for success. It refers to the processes involved in storing, shipping, and managing inventory for an online store or marketplace, as well as the picking, packing, and shipping of online orders. It is divided into local and global logistics.

Local logistics refers to documentation and transportation of goods, whereas global logistics refers to international delivery of products through import or export.

Below are some of the best practices to overcome challenges in logistics as an online store:

  • Find an eCommerce logistics partner early
  • Balance value-add logistics with profit
  • Prioritize free (and fast) shipping
  • Automate what you can
  • Ensure quality and accuracy of order 
  • Connect your warehouses
  • Diversify your supply chain

Wrap up

This article has given an overview of what eCommerce is and why Hong Kong is a hotspot. All you have to do now is get back to the drawing board and come up with ways to deliver your eCommerce products or services to consumers.

If you’re ready to jump on this opportunity, talk to our
friendly team at Sleek to get started.

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