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Learn more about eCommerce Business in India

E-commerce has transformed the way business is done in India. The Indian e-commerce market is expected to reach US$188 billion by 2025, up from US$46.2 billion in 2020. By 2030, it is expected to reach US$350 billion. By 2022, the Indian e-commerce market is expected to grow by 21.5 percent to $74.8 billion. Much of the industry’s growth has been triggered by an increase in Internet and smartphone penetration. The number of internet connections in 2021 has increased significantly to 830 million. Please visit our India Company Registration page for additional information on the different incorporation choices : Limited Liability Partnership, Sole Proprietorship

Table of contents

What is an eCommerce Business?

E-commerce, or electronic commerce, simply means the buying and selling of products and services over the Internet. However, the term is often used to describe all the steps and actions taken by a seller to sell products directly to consumers. The process starts as soon as a potential customer discovers a product, buys it, and uses it until, ideally, becoming a loyal customer. Data is the engine behind all the most successful e-commerce operations, leveraging various best practices such as targeted email marketing, audience segmentation, and marketing automation. For example, when selling online, following up with a customer who has added an item to their cart without completing the transaction can significantly increase the likelihood of the sale being completed.

E-commerce is the business of buying and selling goods and services over the Internet. Customers of the e-commerce company can make purchases from their computers as well as from other touchpoints, including smartphones. E-commerce is growing rapidly in both the business-to-consumer (B2C) and business-to-business (B2B) sectors. In B2C e-commerce, a retailer or other business sells directly to end customers. With B2B e-commerce, one company sells to another. In both sectors, most companies want to enable their customers to buy whatever they want, whenever they want, from wherever they want, and on whatever digital device they want.

What are the different types of ecommerce?

There are many ways to start your own e-commerce business. The most traditional option is to sell products online that you store and package yourself. This is no longer the only option. Today, you can accept credit card payments online for services provided over the Internet. There is even the possibility of developing retail sales through products that are distributed by others via dropshipping.

Here are some ways to categorize the different types of e-commerce stores for sale:

➤ Stores with physical goods: these are the typical online retailers you see everywhere. Shoppers can purchase their products via smartphones or desktop computers. If you run a store with physical goods, you can either stock the items and ship them yourself or have someone else handle the products for you. If you choose another fulfillment method, such as dropshipping, someone else will handle the packaging and shipping;
➤ Service retailer: you can sell services online in any form, from advertising support to graphic design. In the digital landscape, services as a sales solution have become increasingly popular. There are also service companies that offer what they offer on a bid-basis and build closer relationships with customers;
➤ Digital products: E-commerce transactions are handled via the Internet, which means that in addition to providing physical products and services to customers, you can also provide digital products that they can download online. These types of products often involve the online courses’ use, software, or even graphics. Digital products can also take the form of guides or e-books.

Secondly, there are six types of e-commerce businesses:

1. business-to-business (B2B) e-commerce

Business to Business e-commerce is when a transaction is conducted between two companies.

2. business-to-consumer (B2C) e-commerce

This is when stores sell products to consumers. Online retailing (including dropshipping) generally operates on a business-to-consumer model.

3. consumer-to-consumer (C2C) e-commerce

Consumer to Consumer e-commerce is when the consumer sells directly to consumers. This has grown significantly in the last ten years.

4. consumer-to-business (C2B) e-commerce

A little less common is the consumer-to-business model in e-commerce. This is when a consumer sells or contributes money to a business.

5. business-to-business (B2A)

This type of e-commerce occurs when transactions between businesses and governments are conducted online.
This area covers a wide range of services such as social security, employment, and legal documentsThis type of e-commerce has been growing in recent years due to increased investment in e-government.

6. onsumer-government e-commerce (C2A)

Finally, this type of e-commerce includes all transactions between individuals and the government.
Some examples of this would be:

➤ Education: Publication and dissemination of information, distance learning;
➤ Taxes: Tax forms and payments;
➤ Health: payment for health services, and appointments.

Why register a eCommerce Business in India?

Here are seven reasons why e-commerce is such an attractive option for entrepreneurs:

Global reach: With a physical store, you are limited to geographically adjacent markets. For example, if you have a store in Delhi and want to sell in Mumbai, you have to open another physical location. E-commerce does not have this location limitation. Instead, you can sell to anyone, anywhere in the world through your digital e-commerce business;

Always open: Physical businesses usually have limited hours, but an online e-commerce store is “open” 24 hours a day, seven days a week, 365 days a year. This is extremely convenient for the customer and a great opportunity for merchants;

Cost Savings: E-commerce businesses have significantly lower operating costs than physical stores. There is no rent, no employees to hire and pay, and few fixed operating costs. This makes e-commerce stores extremely competitive in terms of price, which usually increases market share significantly;

Automated Inventory Management: It is very easy to automate inventory management using online e-tools and third-party vendors. This has saved e-commerce companies billions of dollars in inventory and operating costs. Inventory management has also become increasingly sophisticated. You can now easily manage your channel across multiple channels. For example, you can sell and monitor your inventory in your store as well as on marketplaces like eBay, Amazon, Etsy, or a physical store;

Laser Targeted Marketing: Online merchants can collect an incredible amount of consumer data to target the right people for their products. This reduces customer acquisition costs and allows online e-commerce businesses to be extremely agile;

Niche market dominance: Because of the low operating costs, your ability to target your ideal customer, as well as reach a global audience that an e-commerce website brings, benefits your businesses;

Geographic Independence: An e-commerce business owner is not tied to one location when running their business. As long as you have a laptop and an Internet connection, you can run your e-commerce business.

How to set up an eCommerce Business in India?

These steps should be considered in order to properly set up your e-commerce business in India:

Step 1. Define the name of your business

Business names are always significant as they give you an identity after identifying what you want to sell. This will be the legal identity of your business. Thus, it opens a room to market your product with ease. The name you choose should be simple and unique. Cooperative research should be done to keep you safe.

Step 2. Define the domain name

There is always diversity in business. The business name acts as the domain name. The domain name system (DNS) stipulates the address of the website that your business wants to keep.
One of the most significant factors for an e-commerce business plan is a website. A website can be useful in developing different marketing strategies. It acts as a point of contact between you and your customers.
A website is always accessible to many people and creates trust and credibility. It is convenient because it tells customers that you exist. As a result, selling can be done anywhere because there are no limitations.

Step 3. Identify the type of business and sign up

People sign up with businesses as a sole proprietorship, partnership, or cooperation. Each of these has an advantage and disadvantage associated with it. For example, operating as a sole proprietor always exposes you to as much risk.
You need to weigh beforehand which type of business is best for you. The IRS allows you to file the business structure yourself or have another filing company help you.

Step 4. Employer Identification Number (EIN)

You cannot operate an e-commerce business without a bank account. To get the bank account that you need for your business, you need the Employer Identification Number. Therefore, this number that is assigned to you acts as an identification. You use it to file taxes for the business. This is always a requirement if you are going to operate on your own or employ people.

Step 5. Obtain legal documents

Each country has its policies and procedures that every citizen must adhere to. This is also one of the things you need to do for an e-commerce business plan. If you don’t, the government has the mandate to declare your business illegal, you are imprisoned, and other penalties.
Business licenses and work permits must be obtained. Confirm with your state what kind of taxes you need to pay to operate. In addition, you need to apply for Goods and Services Tax (GST) certification and store and establishment licensing.

Step 6. Source for suppliers

It is not possible to operate without vendors. Everyone needs to identify and maintain contacts for different suppliers and get the best quality and prices for the materials you need to make your products. Do a thorough and serious search of suppliers to help you identify whom you want to work with.

Step 7. Early Marketing

Media platforms are very essential in e-commerce. It is also necessary for an e-commerce business plan. Alert the customers that there is something good coming so that they can generate the interest to know. Because of this, you may even decide to introduce blogs as a tool.

Step 8. Get an effective software

E-commerce cannot work without using technology. It is significant to get all the systems in place before launching the product.

Step 9. Keep a Smart Inventory

Inventory will help you track the information you need. Make sure the warehouse or store has enough products, so customers don’t miss what they want. You may not be able to tell what will be needed when, but you can always keep a safe inventory. Because of this, it will help you keep track of the orders you place in the future.

Step 10. Be Compliant

Always be smart with deadlines in terms of taxes, licenses and permits needed. Always make sure you comply with the law of the land.

What is required to set up an eCommerce Business?

To start an e-commerce business, a proprietary e-commerce website, or become a seller in a marketplace, the following steps are required:

1. Company registration

First and foremost, when starting an e-commerce business, it is good to have a company have limited liability protection and improve the ease of doing business. Having a corporation would ensure that opening bank accounts in the company’s name or getting Goods and Services Tax registration is easy and quick.
Almost all marketplaces allow sole proprietorships and partnerships to sell on their websites. However, there would be no limited liability protection in case of a dispute. Therefore, it is best to start selling with a corporation.
In the event that developers wish to start a proprietary e-commerce website, it is best to start with a corporation, as this is the only type of entity that can allow for angel or equity financing.

2. Goods and Services Tax Registration

Secondly, Goods and Services Tax registration is a must for becoming a seller on an e-commerce portal or when starting a proprietary e-commerce website.

3. Bank account

In the third step, once the company is incorporated, a bank account can easily be opened in the company name by contacting a bank. In the sole proprietorship’s case, GST registration must first be obtained to open a bank account in the name of the business. Opening a bank account is essential for registering on an e-commerce marketplace or obtaining a payment gateway for a proprietary e-commerce website.

4. Payment Gateway

In the fourth step, a payment gateway would be required for a proprietary e-commerce website to process customer payments. The payment gateway allows the website to accept credit cards, debit cards, online banking, and internet banking payments from multiple banks and credit card companies. Therefore, a single payment gateway is sufficient to accept many online payment forms. Once payment is received from the customer, the payment is sent to the company’s bank account through the payment gateway provided within one or two business days.
In the case of selling through online marketplaces, the marketplace would accept the payment through its payment gateway and credit the money directly to the seller’s bank account. Therefore, it does not require a payment gateway and only a bank account is needed.

5. Legal documents

Finally, when selling online, it is significant to protect the company and the company’s promoters through the proper use of terms and conditions and privacy policy. In the case of a proprietary e-commerce website, the terms and conditions, disclaimer and privacy policy should be drafted by the company based on the nature of its business and the products being sold online.
If the business sells via online marketplaces, the legal document or seller’s agreement is provided by the marketplace and the buyer must abide by the seller’s agreement. Any business needs to read the seller’s agreements before accepting the agreement. You can easily create the following legal documents required for an e-commerce website:
➤ Privacy Policy;
➤ Website Terms and Conditions;
➤ Website Disclaimer

Is there a license required to do business online?

The business license required for an online portal depends on the type of products sold on the site. Some of them are as follows:

➤ Stores and Establishments Act: This is important if you want a payment gateway for your online store. Also, if you want to set up a physical store and it is mandatory to hire staff;
➤ CST/VAT: These are the basic taxes you must pay when selling goods online;
➤ Service Tax: If you provide services online, it is mandatory to pay this tax;
➤ Business tax: Registration for this tax is mandatory if you have one or more employees. Taxes and registration policies vary depending on the status. Therefore, it is advisable to check with your respective state policy regarding these registrations.

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