With 3 to 4 startups emerging every day, you should know how to start an eCommerce business in India. What do you want to know about eCommerce in India? It’s a revolution of startups.
I can give you the numbers. From 3100 startups in 2014 to a projection of 11,500 by 2020(1) and you need to believe that the markets are changing the way it was long back.
Yes. I know that you may be wondering how these people got money to start their own startup? That’s why we got investors, VCs, incubators and so on. Do you believe if I say that the number of active investors in the Indian ecosystem has grown from 220 in 2014 to 490 in 2015(2)?
This is more than double the number of investors in 2014. So what are waiting for? Let’s get started.
Hereby, I shall guide you through various topics that I’m going to cover in this article.
Market Research: Evaluate Your eCommerce Business and Revenue Models
For every business that you’re going to start, you need a thorough market research.
- Once you have an idea that benefits the people out there, think about the problems that might want the people to use your product/service.
- Based on the problem, now you might want to revise your plan
- Collect the relevant information needed to develop your plan
- Analyze the market potential – potential buyers. It is to be noted that 80% of revenue comes from 20% of buyers | Pareto principle(3)
- Competitors – yet another mark which you need to take care of. Plan accordingly whom you are going to compete since you are an amateur.
- Make the decision.
Let’s move over to the revenue model.
You should know that a good revenue model should consist of all the cash flows for at least 5 years from the date of start of the company.
- Prepare a separate cash flow table for outflow and inflow with 5 year predictions.
- Allocate some more capital for each year since you can’t run with the same amount of money that was at the beginning.
- Include expansion plans in your financials(must). You can’t run the same for all 5 years.
- Overtime, you can raise your selling price since your presence is well-known to the market and people can’t avoid you and to make some profit which is the main goal here.
- So let’s compare the cash outflow and inflow here and make decision whether or not to go ahead.
- First look at the break-even; if you think that the break-even achieved satisfies you, you’re good to go.
How To Register Your eCommerce Business In India?
Before you move on to register your firm, you need to decide whether to sell your products through your own portal or to run as a Market Place.
- VAT is the main registration if you prefer to sell your own products through your own portal as a firm.
- Service Tax registration is needed if you prefer to run it as a MarketPlace model.
No. It’s not over yet. We’ve just seen registration for products to be sold. You have 5 options to register an e-commerce firm to run in India which I’ve presented below:
Sole Proprietorship – Here all the assets will be under the name of one person who will be responsible for anything that happens to the company.
Partnership Firm – It needs a minimum of 2 persons and not usually followed in India. Its suitable if you prefer to do your business along with your job.
Private Limited Company – This is the one you all have seen in lot of places because the investor likes to invest in Pvt. Ltd. Companies.
Limited Liability Partnership (LLP) – Minimum of 2 partners are required for an LLP registration. To understand easily, it can be said that it’s a combination of a partnership firm and private limited company.
One Person Company (OPC) – It’s similar to that of private limited company and is suitable for all startups which has one founder or owner who likes to enjoy all the benefits.
This is just a glimpse and an advice from your CA can be of great use in registering your firm.
How Much Does It Cost for your eCommerce Startup MVP?
I’m just going to give an estimate for setting up a basic office which includes space rent and legal charges.
|Legal charges||INR 10,000|
|Payment Gateway||2-4% of transaction fee|
|eCommerce Web Development||INR 5,00,000 – 10,00,000 (it depends on requirements)|
|Computers, servers||INR 60,000 (including hosting)|
|Office rent||INR 6,000 – 7,000 avg. (select right place for easy operations)|
|Shipping||INR 20,000 (for setting up) + individual order cost depending on weight in kilograms|
Should It Be A Marketplace (or) Single brand Online Store?
Market Place and an own online store has its own advantages and disadvantages.
If you think that your product needs no branding and it is at the urge to reach every customer in India, it is wise to sell at a market place. In a market place, you can save marketing costs; lakhs of people visit the site daily; success in short period of time.
If you think that your product is somewhat like a monopoly and nobody can beat you for more than 2 years, you may go with own store which helps branding, customer loyalty etc.
Xiaomi entered Indian market through Flipkart and it has its own store and it also sells through other marketplaces. Though it’s not a market leader, Xiaomi’s move is different from the usual one.
Best eCommerce Platforms For Available Budget
Selecting the most suitable eCommerce platform(4) for creating, managing and maintaining an online store is of critical importance, as it can be the factor responsible for either success or failure for your business.
I have just given intro to some of the best eCommerce platforms across the world.
Magento is the giant in eCommerce platforms with two editions – Community edition which is an open source with all the basic features and the locked features can be unlocked with its Enterprise edition which benefits us with better scalability and full page caching.
Best suitable for: Very large catalogues, more customization, PHP DevOps.
Pros: Solid CMS, Self-hosted, Large plugin repository, Open Source Software(OSS)
Cons: requires Developer team and lots of resources.
Unlike Magento it’s got four versions Lite, Basic, Pro and Unlimited which has got their own features. There is also an option “Shopify plus” crafted for business which offers advanced features regarding security, APIs and fulfillment.
Best suitable for: single (or) low catalogue eCommerce business.
Pros: Shopify community, easy Go-to Market, less Technical Knowledge.
Cons: Hosted commercial software, less customization, high maintenance cost of big sites.
An open source eCommerce platform started to allow world’s sellers in 2008. It is running by the famous Ruby on Rails app, and powering more than 50,000 eCommerce businesses around the globe.. Now, it has no core team for further project enhancements. But still you can use Solidus(5), a fork project of Spree Commerce developed and used by Bonobos and AYR eCommerce team.
Best suitable for: Huge product catalogue, more front-end and back-end customization, ROR DevOps.
Pros: Built on the famous Ruby on Rails(ROR), More stable, easy customization and secure.
Cons: Requires ROR developers, very few plugins and themes comparing to Magento.
A dynamic open source software which is launched in 2007. As reviewed by Andrew Bleakley, it is the first to combine open source and cloud services to offer for the customer. Today, more than 2,00,000 ecommerce stores run on PrestaShop. You can find more beautiful prestashop themes at Themeforest.net(6)
Best suitable for: Team with minimum technical knowledge.
Pros: Beautiful SEO ready themes, SEO friendly URLs and clean dashboard.
Cons: Paid Plugins, Less customization, Not good for large inventory sites.
An open source software which comes with all basic features and most suited for startups – particularly those with hands on web development experience. In order to enable any functionality, you may want to download extension or modules which come at a one-time fee.
Best suitable for: Simple and quick go-to market eCommerce sites.
Pros: Good collections of Themes, easy-to-use UI and hosting availability.
Cons: Not so suitable for sites with large inventories + poor performance.
Launched in 2011, it has made its mark by being downloaded 10.2 million times by users across the globe. Also it’s got a 30% market share for all ecommerce sites. Best suited for WordPress users since WooCommerce can theoretically be integrated into any WordPress theme.
Best Suitable for: Digital Downloads, Single product or small inventory with less traffic.
Pros: Abundant plugin repository and easy web hosting and migration.
Cons: Security, Custom Functionalities etc.
So, if you’re a seller who does your selling in a marketplace, it need not be only one because you have to look at a wider angle to make profits.
So when you are selling at different platforms the same product, the number of items you are selling that product would be the same across all platforms. When a buyer buys your product from one platform, it’s your time and risk to update the inventory in every other platform.
And I don’t wanna mention about the other risks and time-consuming jobs in multichannel retailing because we have software for it.
Payment Gateways for Online transaction
Payment gateways are ones without which you can’t run an online store since in India, it requires a lot of documentation, verification etc.
Why so much hassles for a starter? That’s why I suggest the alternatives that I’m going to talk about hereby.
PayUMoney – One such gateway which requires to link your presence savings account to get started with.
Instamojo – yet another payment gateway which is easy to get started with no setup fee and upfront fees. Now, instamojo is revolutionizing the payment gateway methods. If you are selling any service or a single product you can make great use of Instamojo cart.
|No firm registration required||No firm registration; even freelancer seller can use|
|No current bank account required||Savings bank account is more than enough to get started with|
|No setup cost||No setup cost|
|No annual maintenance charge||No maintenance charges in here too|
|Transaction Discount Rate (TDR) of 2% + 12.36% service tax on TDR||TDR of 1.9% + 14.2% service tax on TDR|
|3 days span to take the money to the seller from the date of delivery||Same as payUmoney, 3 days of span to take the money to the seller.|
Shipping And Logistics
Do you know what’s the word in town? Logistics to be the game changer for eCommerce in 2016(9).
During the time when Flipkart was aggressive in its market penetration, it started its own Shipping and Logistics platform eKart logistics. This is one move of forward integration. Flipkart was the first to introduce product tracking as you can see on the website after you’ve placed an order.
Amazon has its own platform as a backward integration where it collects from suppliers to be shipped for customers.
Trends predicted for 2016-17 be like,
- Tech-based supply chain for Tier I and Tier III cities.
- Apps to track vehicular movements.
- Innovative packaging for perishable goods.
- Reduce turnaround time and to forecast customer demands using big data.
- More tie ups with offline stores for omnichannel.
India’s first end-to-end supply chain founded on May 2011 focused on online retail which provides services to over 25,000 sellers. Delhivery’s commerce technology toolkit is fully customizable to seller’s specific needs. They reach 90,000 customers daily and have got 150,000 SKUs.
Their management tools include global inventory, distributed order management, channel integration, customer engagement, campaign creation and management, fulfilment management and demand and channel analytics.
Unlike Delhivery, Bluedart not only serves for ecommerce companies but also for daily customers. They have the most extensive domestic network covering over 34,267 locations, and service more than 220 countries and territories worldwide through their group company DHL.
Bluedart has an ISO 9001:2008 certification by Lloyd’s Register Quality Assurance. They serve for B2B and B2C initiatives including partnering with some prime portals across the country.
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This article is originally posted at http://www.mothivenkatesh.com/how-to-start-an-ecommerce-business-in-india/