The ecommerce industry has seen tremendous growth in India in the past years. Backed by the latest technologies and developments, it is set to record an even higher growth.
To sell online, you have two options:
Sell on established marketplaces
It is one of the easiest ways to start off with your ecommerce business. Marketplaces have better infrastructure, more customers & more access to a large user-base, great discounts, greater trust, ease of signing up and search-ability. Joining a marketplace often requires a bank account and GST registration.
Building your proprietary (own) ecommerce store
Starting your own store helps you to build a brand. You also have better control on inventory, marketing and end-user experience. However, creating your store is a harder method. A long-term initiative, it requires a good amount of investment and effort. You will need to build a team to work on web development, online marketing and payment gateway.
Legal formalities or registrations required to start an online business
When starting an online business, may it be through proprietorship or marketplaces, the following registrations are necessary:
Company or LLP registration
- When starting an online business, it is good to have a private company or LLP (limited liability protection) to improve the ease of doing business.
- Having a company or LLP ensures bank account opening in the name of the business, or easy and fast GST registration.
- Almost all marketplaces allow proprietorships and partnership firms to sell on their website. However, there would be no LLP in case of litigation.
- Hence, it is best to start selling with an LLP or Private Limited Company.
- With the implementation of GST in India, starting a new business in India has become easy as the procedure for GST registration would be centralized and standardized similar to service tax registration.
- Under GST regime, businesses have no need to obtain multiple VAT registration, as a single GST registration would be applicable across India.
- A seller without GST registration can neither collect GST from his customers nor claim any input tax credit of GST paid by him.
- Once the Company or LLP is incorporated, a bank account can be easily opened in the name of the business by contacting a Bank.
- In the case of proprietorship, GST registration must first be obtained to open a bank account in the name of the business.
- Opening a bank account is essential to be able to list products on an ecommerce marketplace or obtain payment gateway for a proprietary ecommerce website.
- A payment gateway is necessary for a proprietary website to process customer payments.
- Payment gateway providers allow the website to accept credit card, debit card, net banking, internet banking payments from multiple banks and credit card companies. Therefore, one payment gateway is sufficient to accept many forms of online payments.
- Once a payment is received from the customer, the payment gateway providers send the payment to the bank account of the business in one or two business days.
- In the case of selling through online marketplaces, the marketplace would accept the payment through their payment gateway and credit the money to the bank account of the seller directly. Hence, only a bank account is necessary.
- When selling online, it’s important to protect the business and it’s promoters through proper legal documentation and contracts for your business.
- If the business sells through online marketplaces, then the marketplace provides the legal document or seller’s agreement and the seller must abide by the seller’s agreement.
- It is important for any business to read the seller’s agreements before agreeing to the agreement.
Commitment to cyber law crimes
- All online businesses must ensure cyber law due diligence in India.
- This is more so when the cyber law due diligence for companies in India has become very stringent and foreign companies and websites are frequently prosecuted in India for non-exercise of cyber due diligence.
- Furthermore, e-commerce websites in India must ensure privacy protection, data protection, data security, cyber security, confidentiality maintenance etc. as well as with respect to payment gateways that the businesses opt for.
When starting an online business, the most important and difficult task is deciding the right price for a product. The volume of your product sales as well as the profits is largely affected by it. Price remains one of the most important factors in determining market share and profitability. Usual factors taken into consideration when setting product prices are costs, profit targets, competition and perceived value of products.
We’ll tell you more about pricing and related methods next week.