6 Things You Should Know Before Starting an Online Selling Business

Online selling and other forms of e-commerce boomed all over the world at the height of the COVID-19

Online selling and other forms of e-commerce boomed all over the world at the height of the COVID-19 pandemic, and current research suggests that the trend seems to be here to stay. A recent survey by Forrester, for instance, projected that online retail sales will rise to $2.5 trillion by 2024. Furthermore, the same study found the Southeast Asian e-commerce market to be especially profitable, as Southeast Asian buyers alone are expected to account for 64% of global online sales by 2024.

Given the attractive potential profits this business opportunity brings, it’s no wonder many aspiring entrepreneurs in the Philippines and the surrounding region are looking to jump on the online selling bandwagon. The rise of digital services such as online marketplaces, e-wallets, and mobile banking also makes it easier than ever to set up an online store of your own. With just a few clicks, you can open an online storefront, set it to take deposits from RBank Digital and other digital banking channels, and begin selling products from home.

While starting an online selling business is relatively simple on paper, setting your enterprise up for success in the long term takes a bit more planning and preparation. Here are seven important matters to consider for a successful career in e-commerce:

Target Market and Offered Products

One of the most common mistakes would-be entrepreneurs make is to begin sourcing and selling products without taking time to understand their market. Start conceptualizing your online business by thinking about who you want your target customers to be. From there, do some research online to figure out their particular needs and pain points. Once you have the information you need, think about what products your online shop can offer that can help them solve their problems.

Online communities are always good places to start conducting market research because they allow you to see what concerns users in their daily lives and what products and services they’re looking for. If you already have a particular product in mind for your store, you’ll also want to find out how your potential competitors are attracting customers. Checking the websites and social media channels of businesses in the same field will give you an idea of how to serve your own customers’ needs.

A thorough understanding of your target market will help you determine what potential products are most profitable to sell. You’ll ideally want a product in high demand with a low to average number of competitors in the area you want to service.

It’s also wise to choose a product that you’re interested in and preferably one that you already have prior experience with and knowledge of. After all, a product you already like and know a lot about will be much easier to market and sell than the one you’re unfamiliar with.

Potential Profitability

Once you have an initial business concept ironed out, you’ll need to evaluate whether it will actually work in practice. You can evaluate the potential profitability of your imagined online selling business as well as its potential risk of failure, by conducting a feasibility study. This activity will ask you to do extensive research, conduct market surveys, and calculate your projected income and expenses.

To get started, bear in mind that feasibility studies for businesses usually aim to answer the following questions, among others:

  • What products are you going to sell in your online store?
  • Who is your target market? Are they willing and able to pay for your products?
  • Who are your competitors? What is their scope in the market at present? Can your products compete with them successfully due to some advantages (such as better design, lower price, or greater accessibility)?
  • What equipment, manpower, materials, and partner services are required to run your online selling business? What startup costs do you anticipate?
  • What is your current financial situation? Where will you acquire funding to start your online selling business? For example, will you have to take out a loan to cover your initial capital?
  • Is this business idea still potentially lucrative in the long run, or is it simply capitalizing on current trends? What can you do to keep it profitable over time?

If your feasibility study determines that you have a workable idea, you can begin writing out a business plan for your enterprise. A business plan is essentially a written report explaining your business idea and its viability. This is a highly beneficial document for all entrepreneurs to have, no matter the size of their business, as lending institutions like banks and government agencies will typically require it when you apply for business loans.

Legal Registration

Online businesses in the Philippines are required by law to abide by the same registration rules as traditional businesses. Hence, even if you only intend to run a small home-based enterprise, you’ll still need to acquire the relevant licenses and permits in order to operate legally. Make sure to familiarize yourself with the registration processes for the following government agencies:

  • Local government units (LGUs) – All businesses operating in a jurisdiction require a mayor’s permit or a municipal license, which they can get from their local city hall or municipal hall.
  • Bureau of Internal Revenue (BIR) – All businesses operating in the Philippines are required to register and pay taxes with the BIR, which will provide them with a business tax identification number (TIN). The BIR also grants businesses the authority to issue official receipts and invoices for their transactions.
  • Department of Trade and Industry (DTI) or the Securities and Exchange Commission (SEC), depending on your business structure – If your business is a sole proprietorship, you’ll need to register your business name at any DTI office. If your business is a partnership or corporation, you should register with the
  • SSS, Pag-IBIG, PhilHealth – Business owners who intend to hire staff to help run their online selling enterprises will also have to register as employers with the aforementioned government agencies.

Financial Requirements

Naturally, any business requires capital to get off the ground, so you’ll need to think about where to acquire the necessary funds to cover your start-up costs. For instance, new online sellers without sufficient capital on hand can consider taking out personal loans for initial expenses.

In addition to sourcing funds for your operations, you’ll have to attend to a few other financial requirements to get your enterprise up and running. Consider setting up a separate business bank account from which you can manage your work expenses and employee payroll. You can also receive payments from customers through bank deposits into this account.

While many new online shops usually take cash-on-delivery (COD) as their primary mode of payment, offering a range of convenient digital payment solutions may help endear you to your customers. Opening an account with online payment gateways and e-wallets will enable you to take customer payments via credit card, debit card, and direct money transfer.

Suppliers and Delivery Partners

After you settle on a great product and secure funding, you’ll have to figure out where to source your products, equipment, and other materials your online shop will need to operate. Look for reputable wholesale distributors and suppliers who can offer you reasonably priced, high-quality products. This will enable you to price your offerings competitively and turn a good profit from your own sales.

E-commerce customers are also more likely to prioritize businesses that can fulfill orders quickly, so it’s also worth shopping around for fast and efficient delivery solutions to give your store an edge over its competitors. You can either entrust your shipping needs to a courier or shipping company, or make use of delivery apps for on-demand, same-day service.

When it comes to choosing the right suppliers and delivery partners, asking for recommendations from fellow entrepreneurs and other people you know and trust is your best bet. You can also try researching online to see what experiences other business owners have had with the providers you’re considering.

Online Selling Platform

Where you host your online storefront is naturally going to be one of the most important considerations for starting up your business. Your choice of platform will affect the number and nature of customers your store can reach, how you communicate with them and many other important factors. Let’s look at three of the most popular online selling platforms and the advantages they offer in more detail below.

  • Social media sites – Many online entrepreneurs have managed to run successful web stores out of social media websites like Facebook and Instagram. Setting up shops on these platforms is easy and free, making them ideal for business owners with limited capital and tech know-how. They also allow you to interact directly with your buyers and forge very personal customer relationships.
  • Online shopping marketplaces – E-commerce marketplaces are the perfect choice for entrepreneurs looking for a simple and convenient setup process, as these platforms typically already have a standardized set of customer payment and delivery methods for all sellers. Selling on these platforms will also give you direct access to their already huge customer bases, so promoting and advertising your store shouldn’t be too difficult.
  • Dedicated website – Setting up your own website gives you maximum control over the look, feel, and functions of your online store. It also allows you to sell your products directly to customers without having to communicate with intermediaries or pay additional fees to your platform provider. If you have the capital to invest, you may also want to consider hiring a web designer to build you a professional-looking site that will make a good impression on potential customers.

If you’ve always dreamed of running your own shop, now is the perfect time to get your start online. With careful research and thorough preparation, you’ll surely be able to navigate the initial ups and downs and come out with a digital store you can be proud of.