The E-commerce industry in India is on the boom and steering a new wave of change. The lockdown, when most of the shops were shut down, taught millions of Indian households to use the internet and order online, and get things delivered to their doorstep. Interestingly the e-commerce wave in India is not just limited to large metros but also growing fast in smaller towns/ townships, etc.
Following the pandemic, India’s consumer internet space is growing at a rampant speed. Increasingly, global and international PE players are pouring huge capital on Indian e-commerce start-ups.
Though the lockdown has been a growth multiplier for the e-commerce industry in India, the booming industry also capitalizes a lot on strong growth fundamentals. India has one of the cheapest internets in the world and is priced at USD 0.09 / GB. Likewise, India also has an attractive demographic dividend with 65% of the population aged below 35. Such favorable factors are further supporting the industry to grow in a positive direction.
Indian e-commerce segment has large horizontal players such as Flipkart, Amazon, Paytm Mall, etc. Increasingly, a host of new e-commerce start-ups and ventures are emerging in vertical categories such as e-grocery/ fashion & footwear/ furniture/ pharmacy/ food delivery, etc. Likewise, a lot of niche players are also coming up in segments such as milk delivery, meat products, daily essentials, etc.
In addition to new players, existing players are also ramping up their digital presence to tap into the fast-growing consumer internet space. Major retail companies are now adopting omnichannel distribution. Large conglomerates like Tata and Reliance are also raising their stack in the digital ecosystem in India.
How to Start an E-Commerce Business Venture in India
As the digital commerce segment is growing at a lightning speed, tremendous opportunities are unraveling in the segment. Starting an e-commerce business can be a lucrative investment in India. Meanwhile, it is also important for upcoming ventures and investors to know properly about how to start an e-commerce business venture in India.
Mentioned below is a eight-step guide to start an e-commerce business venture in detail. These steps can give a lot of practical advice for businesses planning to enter the e-commerce space.
Step by Step Guide to Start an E-commerce Business in India
Select the category and choose a name
The first step you need to take is to decide on the products you wish to sell and accordingly choose a name. The name will give your business a legal identity through which you can market your product with ease. While choosing a business name it is important to pick a name that is simple and unique and is reflective of your brand.
Design your Website and Set a Domain Name
One of the most vital aspects of the e-commerce business is creating a website, as it acts as a point of contact between sellers and customers. With a website created, an e-commerce business will be able to create trust among customers and customers will also know more about your business. Besides, your website can be easily accessible to customers 24x7 and you will be able to sell all through the day without any limitation. The name of your business will act as the domain name and the Domain Name System will stipulate the website address that you wish to keep. While creating a website for your e-commerce business, you can either choose a pre-built template or can design a website from scratch. Both the options come with their own set of pros and cons. (Though creating a website from scratch is generally preferred)
Choose the Type of Company You Wish to Form
In India, you can either form your e-commerce business as a sole proprietorship firm, one-person company, limited liability partnership firm or as a private limited company. You can decide on the type of company you want to form based on the fact that whether you wish to independently run the company, or run your company with some partners. If you opt for a partnership firm, then you will have to file tax returns and have a tax ID number. This type of online business model requires an Employer Identification Number (EIN) to open a bank account to file the business taxes in the next financial year. However, if you opt for the sole proprietor company then you will require a tax ID number or you can even use your allotted Social Security number.
Register your E-commerce Business
Open a Bank Account
After registering your e-commerce company under the Company's Act, 2013, you will need to open a bank account in the official name of the company and this account can be opened with any bank. In case, if you have chosen to open a proprietorship form of the company then you should obtain GST registration and only then you can open a bank account in the name of your online business. After opening up the bank account, you can list the products on your e-commerce website that you sell and then operate a payment gateway.
For your online e-commerce business, you need to set up payment gateways that will allow you to process credit cards, debit cards, net banking, and card transactions through your e-commerce website. You will need to submit the following documents to obtain a payment gateway for your business:
Logistics & Warehousing
You will need to have proper logistics in place to run a successful e-commerce business in India. Logistics is a shipping process through which an order is shipped to a customer or inventory is transported to a merchant. You also need a software support process through which you can track your shipped goods while in transit until they are finally delivered to the customer. Most e-commerce businesses outsource their logistics to a third-party company that operates in transport and storage. Similarly, you will also need warehousing to stock your products.
Likewise, businesses will need to lease a warehouse to ensure a seamless supply of products. (In the case of food products/ meat/ dairy/ pharma, the cold storage facility will be needed). A lot of meticulous planning is needed to identify and acquire the warehousing, as it represents a crucial node in the e-commerce supply chain. For a small business, a warehouse up to 5000 sq ft is feasible. Medium-sized businesses will require warehouses in the range of 5,000-25,000 sq ft, while large businesses will need warehouse facilities sized over 25,000 sq ft (It is just a suggestion and the actual size needed will vary from case to case.)
Coming to the location of the warehouse, post-pandemic there is growing preference to lease out a warehouse in the city or just adjacent. This can ensure a seamless last-mile supply. This is in contrast to the traditional approach when warehouses were leased out in remote areas to contain costs.
Starting an online e-commerce business is not just restricted to opening a website and expecting customers to visit and make a purchase. If you want to succeed in this business then should know ways to attract customers to the website. In today’s digital heavy times, online marketing such as search ads, emailers, promotional campaigns, etc is critical.
Likewise, enterprises need to heavily focus on social media and content marketing. A comprehensive SEO, social media content, digital PR, etc are important in attracting a large volume of potential customers to the website. Likewise, online reviews are also essential. E-commerce businesses should also ensure that the website is optimized to mobile. (In India over 70% of traffic comes from mobile.)
To sum up it can be said that starting an e-commerce business in India is a lucrative idea presently because the sector is currently booming and set to grow multifold. However, the competition in this sector is stiff and one would need the right planning and fast execution capabilities to successfully penetrate the market. This can come in the form of the right research, data, and access to actionable insights.
How India Watch can Help
The India watch is India-based research and market intelligence consulting, which helps indigenous and international businesses to establish, grow, and evolve in India. Alongside a host of other sectors, we offer tailor-made research and consulting services to the booming consumer internet industry in India, We can offer the following services to upcoming start-ups in the Indian e-commerce sector.
For any further queries, feel free to drop us a mail at firstname.lastname@example.org