As Asia’s financial hub, Hong Kong remains in the spotlight for where is the right place for eCommerce business. Favorable conditions in Hong Kong grant online businesses great doors of opportunity. Notwithstanding, careful planning before embarking on your new business is a key to success.
This article presents a question checklist and necessary steps for you to kick start your eCommerce company in Hong Kong. Let’s find out!
1. Hong Kong eCommerce is on the rise
Despite COVID-19, eCommerce development in Hong Kong is surging as the number of retailers going online and customers using digital shopping platforms skyrocket. In particular, the Hong Kong eCommerce statistics 2021 from Statista has shown the huge potential growth in the long term of this market:
- Annual revenue from eCommerce – projected to reach a yearly growth rate of 10.44%;
- The average revenue per user – expected to get to US$1,568 by the end of 2021;
- Market volume – expected to increase to US$12,879 million by 2025;
- The number of users in the Hong Kong eCommerce market – estimated to hit over 6.5 million users by 2025;
- User penetration – predicted to amount to 83.8% in the next 5 years;
- The top 3 largest segments of Hong Kong eCommerce – include Fashion, Electronics, and Food & Personal Care.
Hong Kong’s eCommerce potential is attracting global entrepreneurs. For detailed statistics and further explanations of e-business in Hong Kong, read on for more information.
Entering a prosperous market undoubtedly pave way for tremendous opportunities. But there is more. Both favorable tax policy and credible banking system are substantial supports to why you should select Hong Kong to start with. Hong Kong is well-positioned thanks to its transparent system of law and simple incorporation process; not to mention the city’s tons of tax benefits for businesses.
2. Ask yourself a few questions before getting started
A well-prepared business plan is actually essential for the success of your eCommerce business in Hong Kong. We recommend that you carefully review the questions below. Hope they will help!
2.1. What is your target market?
This is the very first question when considering your place to start a business.
An easy-to-reach location like Hong Kong, fortunately, is a strategic gateway to a wide range of other potential markets. China is the largest consuming market in the world to be mentioned.
So if you are targeting Mainland China and different parts of Southeast Asia, Hong Kong is the right place to base your eCommerce company.
Determining your target market is really important, as it will also act as a lodestar for your setup of the selling platform and the fulfillment plan.
2.2. What is your selling platform?
Depending on your chosen target market, select an appropriate platform for your online business.
Many entrepreneurs may wish to hit major marketplaces, namely Amazon, eBay. In another scenario, some just want to focus on their domestic buyer market. Suppose the largest population market, China, is your primary audience, then sales channels such as Alibaba, Pinduoduo, Taobao, or Tmall would gain more in popularity.
Just a kind reminder, if you scrutinize this ‘giant’ market, the Chinese online retail sales even have been larger than the rest of the world brought together. Its sales in 2019, interestingly, were three-fold higher than that of the US. China is also a harsh competition for new eCommerce players, so a well-planned preparation is always of vital significance before getting started.
2.3. Have you got your eCommerce business model?
Well, this is really important! A wise choice of business model can enhance your business’s speed-up.
There will be no all-embracing structure for your eCommerce platform. You should decide based on the specific circumstances of your company.
One traditional business model for most eCommerce business operators is to self-run and ship to their customers one by one. Disadvantages are very apparent. It is a time-consumption process, the burden of workloads; not to mention its financial pressure.
In the digital era, there are alternative eCommerce structures that offer online businesses much more flexibility and cost reduction. As a supportive partner for every small business, BBCIncorp draws up a list of common business models for eCommerce entrepreneurs:
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Your supplier will do shipping to the end customer.
You don’t need to have an inventory, warehousing stock, or focus much on the product life cycle.
And this model frees your online business from many hassles of packaging and shipping as well.
But, if anything went wrong with the order – i.e., the product quality is low, you are actually the one to face it first.
Rica creates an online store with an eCommerce website selling home appliances. When customers place an order, Rica will forward it to her supplier to conduct packaging and shipping directly to the customer.
People widely applied this model in beauty-related industries.
Your company will buy your desired products from the supplier. Such products are then relabeled and maybe re-packaged with your branding before you sell them to customers.
Get yourself ready since there is a lot to do if you want to go for a wholesale eCommerce business.
Stock management, order and shipping tracking, warehousing preparation are those kinds of things.
You also need to send products in bulk on Google or Amazon marketplaces. Particularly, your company distributes a large volume of products to small shops and retailers at a discount fee. They then resold products to buyers at higher prices.
A subscription-based online business model?
Your online store will encourage customers to subscribe to its service for a specific period of time – i.e., 1 month, 3 months, 6 months, or in one year. Interestingly, when each subscription period ends, the customers can enjoy many benefits. Those can be a box of existing products for free, small gifts, discount rates, and so on.
The more satisfied customers are, the more additional subscriptions your eCommerce business can earn.
Some eCommerce businesses may feel interested in marketplace-connected models like Fulfilled by Amazon (FBA). Ecommerce companies can outsource storage and shipping to Amazon.
Simply put, when there is an order, Amazon will package and ship products to customers from the Amazon fulfillment center. This way enables an online business to relieve overloaded burden; however, it requires additional costs arising from FBA service. Things are sign-up fees, fulfillment and storage fees, removal fees for damaged products, etc.
Alternatively, Fulfilled By Seller (FBS) is another worth-mentioning option.
FBS is fairly similar to FBA, but it is the eCommerce business that will be responsible for packaging and sending products directly to customers. By this model, the online business does not need to pay service fees to have Amazon handle, but it takes full control of the process.
So, which eCommerce model suits your business most?
2.4. What is your proposed fulfillment plan?
You should well consider shipping and warehousing associated matters in your plan when coming to an eCommerce business.
Again, picking an appropriate eCommerce model is of vital importance. It, in fact, will be closely tied with your storage and logistics plan. Some might choose to build their own warehouse, meanwhile, others may want to outsource to another third-party service provider.
Choosing fulfillment centers to allow online merchants flexible shipping and warehousing services. You don’t need to operate your own physical storage, but just directly push your inventory out to the fulfillment center. From the center, they distribute products to customers over the world.
Remarkably, most fulfillment centers are normally bound up with eCommerce marketplaces (Amazon, eBay, and many others), facilitating much more convenience for online businesses.
There are many fulfillment centers available for online businesses. In the USA, the Fulfillment Center of Amazon is a typical choice.
Hong Kong or China-based fulfillment centers such as Shipwire, ZhenHub, Exchain are also names to gain in popularity.
2.5. Opening a merchant account: Is it necessary?
Opening a merchant account is relatively essential for your eCommerce business if you are selling products on your own websites or operating on selling platforms.
Most significant sales channels such as Amazon, eBay will require eCommerce players to connect with a merchant account and payment gateway. This pattern also goes for Hong Kong eCommerce companies. Paypal and Alipay accounts are the top-most ones in this city.
And if you are getting a merchant account opening in mind, you should first understand your target customer to know which one is best suited for your selected type of business.
3. How to set up an eCommerce company in Hong Kong
A typical process of setting up an eCommerce company in Hong Kong includes the following steps:
- Register a company
- Get a bank account opened
- Check whether the business must apply for a license
- Decide on the marketplace
- Arrange bookkeeping and maintain the company
3.1. Register an eCommerce company in Hong Kong
One very first question for most new business players when embarking on the blistering-pace eCommerce industry in Hong Kong is how to set up a company.
The positive thing is that it is as easy as incorporating a normal company in Hong Kong. Dedicated support from a local professional service firm like BBCIncorp can even streamline your Hong Kong company incorporation within 24 hours.
Registering an eCommerce company in Hong Kong goes through 4 key steps:
- Choose your ideal type of business
- Select your company name
- Settle upon your company structure
- Apply and submit required documents to the Companies Registry of Hong Kong
How do you form a company in Hong Kong? The process is obviously streamlined and straightforward like this: How to Set Up a company in Hong Kong
Among various types of business entities in Hong Kong, a private limited company is the most common one for those engaging in online businesses.
The force behind this popularity is due to its separate liability among shareholders, meaning your personal assets are secured; not to mention the low tax rate imposed on and the flexibility of the ownership transfer in a private limited company in Hong Kong.
As compared to a sole proprietorship or a partnership, to start an eCommerce business in Hong Kong through a private limited company is a worth-considering option.
3.2. Open a ‘bank’ account in Hong Kong
Well, Hong Kong is among the world’s best global financial hubs.
And you are planning to set up an online business that will require your business-related transactions to work well on digital platforms.
What the result is? Opening a bank account or bank-like account is actually indispensable. If you are going to think about the banking system in Hong Kong and pick a business-friendly banking partner.
Some options to put in your shortlist should be HSBC, OCBC, DBS Hong Kong, Citibank, and so forth.
Some may wonder about the challenges of successfully getting a traditional bank account in Hong Kong opened. Certificate of Incorporation, your company’s business proofs, the company’s registered address, and additional paperwork must be well prepared, as your bank of choice requires.
For some nationals, Hong Kong banks apply stringent conditions for the eligibility of opening their corporate bank accounts. The nationality of your company’s directors, shareholders, and beneficial owners should be under examination as well.
Alternatives to bank accounts are now growing fast, facilitating the ability to open accounts for most eCommerce businesses.
We can also say that money service operators (MSOs) are established to suit eCommerce businesses. Neat, Airwallex, Statrys are cases in point. It grants you a super-fast registration with minimum balance, multi-currency account availability, and especially a completely online process.
Top 6 Financial Service Options For Your eCommerce Business In Hong Kong
BBCIncorp is collaborating with trusted banks and fintech firms to help you easily open a business account for your eCommerce company in Hong Kong. You will receive attractive offers when opening your account with BBCIncorp’s partnered banks and fintech companies. Explore this article for detailed information
3.3. Lookup for a license
A business license doesn’t apply to all businesses in Hong Kong. Depending upon your choice of business activity, you may have to get a proper license or permit to run your online business.
Suppose you are about to start your Hong Kong eCommerce business by selling Chinese herbs or cosmetics products online, applying for a business license with the Hong Kong’s Department of Health is a must.
Or, your company intends to operate in serving alcoholic beverages online, having a liquor license in Hong Kong is compulsory.
Any license or permit is required for your business line in Hong Kong? Read this blog to find out the answer.
3.4. Decide on your marketplace
Choosing and understanding your target marketplace is another important step.
Each eCommerce company can generate different ideas of what is the best eCommerce platform to meet the company’s demand.
Is it Taobao, HKTVmall, or Tmall where you’ve targeted to penetrate the Chinese market?
Or, do you want to become a seller on eBay or Amazon?
These are common questions for Hong Kong businesses to put in their business plan.
To operate in a marketplace, it is necessary to send them your business registration number which you have already received after your Hong Kong company setup.
Moreover, they would require your bank account number to verify account details.
Note that some significant players like Amazon also restrict the number of countries allowed to sell products on their platform. Currently, Amazon accepts 103 countries to register for becoming a seller, including Hong Kong. Therefore, having a careful examination of each marketplace to check whether it is the right platform for your Hong Kong business is very essential.
3.5. Arrange bookkeeping and maintain your company
Unless exempted as regulated in Hong Kong laws, an eCommerce company in Hong Kong, like most companies, must follow annual compliance requirements with competent authorities. Particularly, the company needs to:
- After the first 18 months since its incorporation date, file Profits Tax Return to the Inland Revenue Department (IRD) of Hong Kong.
- File an Employer’s Return of Remuneration and Pensions with IRD
- Within 42 days from the anniversary date of incorporation, file an Annual Return with the Companies Registry
Note that financial statements in your reporting must be audited before submission (except for a dormant company).
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Compact view of your company’s regulatory requirements
A quick breakdown of key reporting timelines
Keeping records of your business-related transactions, therefore, should be carried out out regularly. For eCommerce companies with online stores, they actually come with a significant number of transactions to handle at once.
Seeking an online Hong Kong accounting service is an effective solution to stop your business from wasting your money and time when dealing with such duties.
4. The bottom line
How to start an eCommerce business in Hong Kong? You may now get your answer. Keep in mind, asking yourself a few questions before setup is never of no use.
There will be no one all-embracing business model for eCommerce businesses, so it is vital to understand their pros and cons to your business circumstances before selecting. Having a fulfillment strategy and opening a merchant account is very essential when coming to running a Hong Kong online business as well.
Important steps to set up an eCommerce company in Hong Kong: Register a company, open a bank account, check the need for a license, determine the right marketplace, and keep the company stays compliant in the post-registration stage.
Still uncertain about the incorporation procedure for an eCommerce business in Hong Kong, and need more advice from our dedicated experts? Feel free to drop us a message now!