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How to start an ecommerce business in the UK? - General business planning

Saturday, 30 Oct, 2021

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If you want to be your own boss and create values for the community, starting an online business in the UK is the best decision that you ever made. Consumers are increasingly buying products and services online and you are more able to access the knowledge and tools than ever to make things happen. There is never a better time to start an ecommerce business in the UK than right now, so let’s check some basic steps on setting up an ecommerce business in the UK.

How to start an ecommerce business in the UK?

How to start an ecommerce business in the UK?

I. For UK residents

For many beginners, starting an online business in the UK might make you feel overwhelmed. Do not worry too much about that, we can help you go through an overview of steps to create your new future business.

Setting up an ecommerce business in the UK - plan for UK residents

Setting up an ecommerce business in the UK - plan for UK residents

1. Market gap research

Starting an ecommerce business in the UK is similar to anywhere around the world, business owners need an idea to fill the gap. Firstly, we should understand which areas in the ecommerce industry have a specific demand.

Which segments suit your interest and ability?

Online sales of tangible goods to private end users (B2C) are included in the eCommerce market . Purchases made on a computer, as well as purchases made on smartphones and tablets, are included in this definition.

There are also digitally distributed services (e.g: travel tickets), online stores dedicated to digital media downloads or streams, online stores dedicated to B2B markets, and sales between private individuals (C2C) within the eCommerce market.

It is not easy to recognise a market gap over a night. Aha moment may occur during your working time, daily activities, rethinking moments or observing how our society runs. It also comes along with logical thinking, life experience and market analytics.

There are five categories that are mentioned in 2020 when it comes to ecommerce:

  • Fashion: was the largest segment in the United Kingdom and accounted for 31% of the national eCommerce revenue.
  • Toys, Hobby & DIY: accounted for 19% of the national eCommerce sales.
  • Electronics & Media: took the third position with 18% of the total eCommerce market.
  • Food & Personal Care: followed at the rate of 17%.
  • Furniture & Appliances: contributed to the total number with 15% revenue.

Which issue do your customers suffer from?

After choosing which segment we can start an ecommerce business in the UK, the next step is to answer the question of what is the pain point of consumers in this segment? As long as we can find the correct answer, we probably went 50% of the way. Helping customers solve their problems means we gain enormous profits.

2. Identify product range and competitors

In this stage, we will write down the customer’s problem statement and brainstorm multiple products that could serve as a solution.

Trends hunting

You can learn more relative information before creating your product list by hunting trends across many online platforms. You will get to know which regions search more about the product keywords, how the rates fluctuate according to seasons, how many search times which reflect the demand. Some of the reference sources are:

  • Google Trend
  • Google Keyword
  • Quora
  • Trend hunter (recommended)
  • Reddit
  • BuzzSumo
  • Etc.

Another way to track the most popular products is surfing other marketplaces namely

  • Amazon
  • Etsy
  • Folksy
  • and Ebay

Checking the showcase currently demanded by online shoppers may give you an idea for your future product list.

Evaluate your products list

Let’s reconsider product features that may be hard for startups at the beginning:

  • They are too large or heavy
  • They are fragile
  • They have complicated regulations
  • They are perishable
  • They are too easy to buy locally

Product positioning for starters should avoid the above points to enable your first hand ecommerce business in the UK to make strong steps.

Competitors learn

When you already get your winning products, the following step would be taking a competitor watch. You can try their products to understand their business concepts deeply. Besides, learning from customer reviews on websites, review platforms, social media channels and groups is also a good source of reference.

To earn better social listening results, you should join some typical social community groups on Facebook, Twitter, WhatsApp and other social media to get the real datas. This way assists you have a look of language customers talk around the products and current complaints.

When conducting a competitor analysis, make sure that you have taken these notes:

  • Who are their target customers
  • What market share do they currently account for
  • What is their unique selling point
  • What is their key benefits or features which are highlighted in sales materials
  • Price point across the markets
  • How do they approach shipping
  • Their marketing tactics
  • Social media engagement and channels
  • If they have received any funding or venture capitals

Above checklist could give you a general view about the market and from there, you can jump into making a business plan.

3. Business plan

If you are running a business, you must have products to sell and a good plan. So in this stage, we are going to go through the plan of starting an ecommerce business in the UK.

Test market

  • Now when you already have your own products, you can test the market by building a landing page to promote your potential products. To collect more real data, you can try to run a few paid ad campaigns to drive traffic and even potential leads.
  • Or you can leverage audiences in crowdfunding. There are many crowdfunding platforms that you can use.
    1. Best Overall: Kickstarter
    2. Second Best Overall: Indiegogo
    3. Best for Creators: Patreon
    4. Best for Shopify Stores: Crowdfunder
    5. Best for Personal: GoFundMe
    6. Best for Small Businesses: Fundable
    7. Best for UK and Europe: Crowdcube
    8. Best for Seed-Stage Companies: Crowdfunder
    9. Best for Nonprofits: Mighty Cause
    10. Best for High-Growth Startups: SeedInvest

Supplying sources and manufacture

Starting an online business in the UK requires you to take every single step carefully. Finding a supplier is really crucial, it determines how many percent of your net profits are and the quality of your products and services.

Following that is to find manufacturers to produce your products. You will have options of choosing a domestic manufacturer or a less expensive manufacturer overseas.

For enterprises who produce their unique ideas or products with more variations that are brand new currently, it is better to possess a chain of manufacture for your own product in the long run.

If you want to set up quickly and run or to sell a variety of product types and brands. The good option for you is purchasing products wholesale.

Channels

When your product making is ready, the following task is to find your distribution channels. The top of mind solution when starting an ecommerce business in the UK would be your website. Like a brick and mortar store, your online store is a platform which displays all of your products collection. Customers are able to order directly from your site and pay directly at checkout phase.

Another distribution channel when it comes to starting an online business in the UK is ecommerce marketplaces. In the UK, there are various well known platforms to open a seller account and start an ecommerce business in the UK easily such as Amazon, Ebay, Etsy, Folksy, Not On The High Street, Wish, Fruugo, OnBuy, Cratejoy, Newegg, etc.

We cannot deny the new role of social media. Not only are they branding channels, these platforms also sell your products to online customers. By setting service menus and running promotion campaigns, you actually can receive orders from online shoppers.

Development plan

Development plan enables you to visualise your business road map. Try to imagine how your future ecommerce business in the UK will look like in the next 2 to 3 years. You should make it as clear as possible, for every phase of growing your ecommerce business in the UK, what action you will take to scale up the ecommerce business and how much needs to be invested in?

A crucial thing in doing business is that if you plan for a new business birth, you also plan for its death. This is not negative at all, because we cannot ignore risk management. How does it look like if your ecommerce business in the UK runs with poor performance? Should you shutdown it to minimise loss and what is the loss threshold for closing the business?

Team on

Let’s think about functions and who will be responsible for that. Human resources are also important when setting up an ecommerce business in the UK. Are you a person who works well only when you do everything or you prefer team work? Normally, people need a team to support them to make the idea come to reality. Depending on your background and budget, you can share your business idea to your personal network or you can hire employees.

Company overview

This section of your business plan should answer the following fundamental questions.

  • Who are you?
  • What do you plan to do? (Mission, Values, Company structure, Objectives, Key management members)
  • What do you sell?

4. Financial plan

No one would forget talking about the budget. When you invest in setting up an ecommerce business in the UK, you must estimate how much fund to sponsor for the business. Based on the above research information, you can list down the cost for planning activities. Here are some costs that might contribute to the needed budget:

Long term investment

  • Whether you sell tangible goods or intangible services, you do need physical space or offices, machineries, tools and facilities, long term supplying services for producing and operating. Knowing exactly the cost in the long run could help you prepare better and avoid capital shortage when your project is already run.
  • Normally, people often set a back up budget, it fluctuates from 30% to 50% of the total figure that you have estimated.
  • Your long term financial capital should be planned in the term from 2 to 3 years.

Short term investment

  • Selling expenses is the first cost to watch. How much you will fund for marketing campaigns. To have a general number of money for digital marketing investment, you can do research by getting the quotations from some lead generation agencies or paid ad service providers.
  • Another important expenditure is salary to pay for your employees or even for you as a general manager. Being your own boss does not mean that you would not pay for yourself. Try to plan the salary fund in 1 year at least. However the staff salary depends on your sales targets, it can be changed if your business grows and requires more human resources.
  • Production expenses or storage expenditures are also the variation cost. Depending on your business strategy, your KPI expectation and the current market demand.

Fundings

With clear targets and estimated budget, it is time to cross check with your current pocket. Can you afford to start an ecommerce business in the UK or you need more partners and investors. Partners are individuals who will join the business by taking a role in management and support funds for setting up an ecommerce business in the UK while investors only sponsor capitals, and give you advice rather than be directly involved in the business operation.

Whether you are starting an online business in the UK or anywhere else around the world, you do need a legitimate entity. Due to the fact that running an online business requires business actors (sellers and buyers) to exchange and get paid online. All transactions happen under the government regulations and payment systems. Moreover, some suppliers or business partners would not actually work with you if you have no business legal. As a result, you cannot grow your ecommerce business without a company legal entity.

If you want to get more information about how to register an ecommerce business in the UK, you can read the guideline of PayCEC and contact us for support.

6. Understanding SEO

SEO practice is a vital component when starting an ecommerce business in the UK. Going along with paid ad campaigns, SEO efforts help you grow your ecommerce business more sustainable by generating organic leads and amplifying your brand through the internet environment.

You need to be aware that SEO will not bring instant results, and it needs time for seeding like planting a tree. SEO activities should be executed at the same time with paid ad marketing. You need to spend time to learn more about SEO tactics or to save time and resources, you can hire a SEO expert or a team to specialise in this task or even you can outsource this to an SEO agency.

7. Build up your e-commerce store

You cannot run an ecommerce business without an online presence. The Key online stores are your official website, online stores on marketplace platforms (if any) and social media channels.

Website

There are various elements that create a standard website

  • Business name, logo and trademark (can be updated later)
  • Website domain name
  • Hosting
  • Set up website and design
  • Add online store and blogs
  • Integrate payment gateway

If you are a technical savvy person, the stage is your. However if you have limited knowledge and skills in this field, it doesn’t matter. You can use freelancer services on Fiverr.com or Upwork.com.

Online store on marketplace platforms

Don’t forget to open an online store on other ecommerce websites if you can. By taking advantage of the famous marketplace companies like Amazon, Etsy or Ebay, etc., you can improve the opportunities to approach more online shoppers.

Social media channels

In most cases, social media platforms seem like branding channels rather than selling methods. However, customers can reach your stores via social media, and they make an order directly on Facebook, Instagram, etc. They even have not yet visited your website.

8. Shipping

If you sell intangible products or services, it is fine. But you need to understand more about shipping when it comes to tangible products which require delivery efforts.

Royal Mail is the most popular delivery service provider among online stores in the United Kingdom. Royal Mail was named as one of the suppliers by 36% of those who indicated which service they use to send their goods. Furthermore, with rates of 29 percent and 22 percent, DPD and Hermes are among the top three delivery service firms offered by online retailers in the United Kingdom.

When having a website, we cannot ignore privacy policy and legal agreement or terms of service. With these statements, your customers have chances to know clearly your business, your products and services, and does your company comply with customer information privacy? Is it safe to provide personal information or payment details on your website? The stronger and more clear of your legal agreements, the more trustworthy your business will be in customer’s eyes.

To have good documents, you can learn from other competitors in the same industry. In addition, you can hire freelancers who are experts in legal practices, or law consultants to help you. It is essential to have a legal team in the long run, there are so many tasks related to law and regulations that you should consider.

10. Marketing plan

There are a bunch of things to talk about a marketing plan. We are going to let you know in general about essential notes, it might vary depending on the products and services.

Lead generation

We have to admit that doing marketing means doing business. All marketing executions support and facilitate sales. Starting an ecommerce business in the UK needs a customer database. Your marketing plan should include strategy for paid advertising (search advertising, display advertising) and strategy for organic marketing ( SEO, viral contents).

At the beginning, paid advertising is needed, and the budget for a newborn brand could reach $10,000 in the first year or even more. It always has a solution for everything, so you can reduce the amount for paid ad investment by equipping you with more skills and join many online classes to enrich your knowledge in search engine optimization and display advertising.

Branding

Customers will not buy your products until they know you indeed. A good approach to the heart of consumers is brand image. It is very important when positioning your brand, because the way your brand presents will attract customers who reflect this visual.

  • Brand identity is a statement of how your products are.
  • Communication strategy will determine what message you will talk to your customers.
  • Graphic design guideline which aligns all of your marketing materials.

II. For foreign enterprises

When international enterprises invest in setting up an ecommerce business in the UK, you are probably running a business outside of the UK and planning to scale up in the United Kingdom market. That is why in this section, we are not going to share approaching steps like a new joiner, but we may discuss regulations and international business.

Starting an online business in the UK - plan for foreign enterprises

Starting an online business in the UK - plan for foreign enterprises

1. Get to know UK regulations

The UK is an open door for international investment, and there may be no limitation for companies from the US, countries in Five Eyes allies and the European Union, etc. Before starting an online business in the UK, you should read as much as possible about the rules, regulations and law in business.

A good reference you can read is the UK government website . If you are not good at doing research by yourself, you can seek advice from law consultants.

2. Estimate investment capital

Money is almost everything in business. Try to determine exactly how much funds should be invested in. Based on the number of your previous investments in other jurisdictions, you can plan a similar budget for UK business.

3. Incorporation and open bank account

The best solution in UK business would be LTD companies. Normally, many foreign investors choose to incorporate limited companies when running their ecommerce firms. But there are 3 popular company types for incorporation in the UK as table below.

Type of Business entity Incorporation information
Private Limited
General Information
Corporate Income Tax 19%
British Based Legal System Yes
Double Tax Treaty Access Yes
Incorporation Time Frame (Approx., days) 2
Corporate Requirements
Minimum Number of Shareholders 1
Minimum Number of Directors 1
Corporate Directors Permitted Yes
Standard Authorized Capital/Shares 10,000 GBP
Local Requirements
Registered Office/ Registered Agent Yes
Company Secretary Yes
Local Meetings Anywhere
Local Directors / Shareholders No
Publicly Accessible Records Yes
Annual Requirements
Annual Return Yes
Audited Accounts Exempted if turnover
Public Limited
General Information
Corporate Income Tax 19%
British Based Legal System Yes
Double Tax Treaty Access Yes
Incorporation Time Frame (Approx., days) 2
Corporate Requirements
Minimum Number of Shareholders 1
Minimum Number of Directors 1
Corporate Directors Permitted Yes
Standard Authorized Capital/Shares 50,000 GBP
Local Requirements
Registered Office/ Registered Agent Yes
Company Secretary Yes
Local Meetings Anywhere
Local Directors / Shareholders No
Publicly Accessible Records Yes
Annual Requirements
Annual Return Yes
Audited Accounts Yes
LLP
Limited Liability Partnership
General Information
Corporate Income Tax Nil. Members are taxed based on their incomes.
British Based Legal System Yes
Double Tax Treaty Access Yes
Incorporation Time Frame (Approx., days) 2
Corporate Requirements
Minimum Number of Shareholders 0
Minimum Number of Directors 0
Corporate Directors Permitted No
Standard Authorized Capital/Shares N/A
Local Requirements
Registered Office/ Registered Agent Yes
Company Secretary Yes
Local Meetings Anywhere
Local Directors / Shareholders No
Publicly Accessible Records Yes
Annual Requirements
Annual Return Yes
Audited Accounts Yes

For more information, please contact our relationship manager for support in establishing your company entity and open a business bank account to manage your funds and reinvest, and a merchant account to collect online payments from shoppers.

4. Set up domain for UK location

For companies wanting to export their brand business to the UK, you should set up an extra domain for the UK market with local specialised contents. In this way, you can easily approach your local customers in the UK and optimise your revenue.

5. Partnership & Channels

Affiliate marketing can contribute to your sales considerably. Selling products and services via partnership is a sustainable way to optimise your marketing budget while ensuring a good pipeline for sales flow.

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