Starting an online business in the UK can be a great idea! According to the official national statistics, Internet sales accounted for 27.9% of the total UK retail sales (both goods and services). It is projected that the trend will continue to go up in the coming years.
On a global scale, the figure of online sales also skyrocketed. In 2020, retail sales from e-commerce alone have reached 4.28 trillion USD worldwide.
The statistics have shown a huge financial potential of an online business in the UK. More and more people are in favor of making their orders online and setting up an online business is now easier than ever before. Here is what you need to do to begin your own online business in this prosperous kingdom.
1. Getting Ideas for Your Online Business in the UK
Everything starts with a simple idea. Try to figure out what kind of goods or services you want to offer online, in the connection with whom and where you will sell those products.
Below are some popular business models that you can apply to your UK online business.
1.1. Business Models for E-commerce
The explosive growth of e-commerce is undeniable all over the world and also in the UK. If you plan to sell your products on the Internet, here are some models that you can consider:
Traditional online store
You manufacture your own products, store them, advertise them on your own website (or other channels), and sell them to customers.
Dropshipping
This business model has been applied worldwide. It is suitable if your company runs a retail business. Here how it works:
- Customers make their orders with you (through your website or other channels).
- You send the orders straight to your supplier.
- The supplier will process and ship the products directly to the customers.
You will make profits on the price difference. For instance, a lamp from a supplier costs you $5, you sell it to customers for $10, you make a profit of $5 each.
The advantage is you do not have to worry about order fulfillment, as long as you work with a good supplier or distributor. Your business’s main focus is to build efficient online channels, attract customers, and persuade them to place an order (by creating helpful content to introduce your products for example).
On the other hand, the drawback is you have no control over the supply of goods, but still take responsibility for them. If the products are damaged or cannot meet the customers’ expectations, the bad reviews are on your business.
Wholesaling and warehousing
With this model, you will make bulk orders with a supplier, then store the products in a warehouse. When customers make a purchase on your website, you will directly ship the products to them from your warehouse.
This business model can work well for both B2C and B2B businesses. If your business sells directly to consumers (B2C), it can help you reduce the input cost because you order in bulk. This means you earn more profits when selling products to individual customers, compared to dropshipping.
In case your business sells to other businesses (B2B), wholesaling and warehousing help you to fulfill their needs as businesses will normally place bulk orders with you. The profit per product will be lower, compared to when you sell to individual customers. However, the large orders will make up for this.
There are certain issues that you should consider when aiming for this business model. The first thing is the warehouse. You could construct your own warehouse or rent one. In either case, it would cost you a significant amount of money.
The second matter is finding sufficient customers. Buying goods in bulk for storage would cost you major expenses. If you cannot find enough customers, these expenses can turn into a big loss.
White Labeling
White labeling means you will work with an original equipment manufacturer (OEM). OEM is a unit that makes parts of the products or the whole products for a company.
You will get the supplies from your partnered manufacturer and sell them to your customers. The advance is that you are allowed to put your brand name and logo on the products. This will make it feel as if you are the actual manufacturer.
This business model will help you reduce the cost of production since you don’t need to invest a huge amount of money to build up your factory or any manufacturing facilities.
However, you will not have control over the idea, concept, material, and the process of production. The third-party manufacturer will handle all of these. Your mission is to find the products that sell well on the market. You will also need to create efficient sales channels, customer service, shipment, and other marketing strategies.
Private Labeling
Private Labelling is similar to white labeling in the way that you will buy your products from a third-party or contracted manufacturer. The products will also carry your business brand on them.
The difference between private and white labeling is that private labeling allows you to have control over the production. You get to specify everything throughout the process, from the idea, materials, appearance, package, to the quality of products. The manufacturer will work exclusively according to your requirements.
This business model is the best fit for starting your online business in the UK with innovation. A unique product can make your business very competitive in the market. But in return, there will be quite a lot of work that needs to be done. Besides all the work listed above (in other business models), you will also need to focus on designing your products and planning the production.
1.2. Other Common Business Models
You want to know more? Here are some other basic but popular models that you can adopt:
Subscription
With this model, customers will register to get access to certain online services of your business. They will then have to pay on a regular basis to maintain the services. Netflix is an example that is currently doing great with this business model.
Premium
Your customers will be allowed to use the products or services of your business, but only to a certain extent. To use exclusive or advanced features of these services, they have to pay additional fees. Mailchimp and LinkedIn are case studies for this type of business.
Brokerage
Applying the brokerage model, your online business acts as a middleman which connects the buyers and sellers in a community. Your mission is to create an online marketplace or platform that attracts as many buyers and sellers as possible. It should be convenient, easy to use, and user-friendly.
Advertising & Affiliate
This is a very simple way to earn money online. Other companies and individuals will pay you if they want to place a piece of advertisement on your business channels.
You can also promote products from other sellers on your channels. Every time a customer buys such products through a link on your channels, you will get a commission from the sellers. This is called affiliate marketing.
At the simplest level, your company needs to build a network of website(s) and social media. The mission is to attract as many people visiting these channels as possible. The more visitors there are, the more views the ads get, the more money you can earn from your clients.
Here’s how many people do it. You write a bunch of blogs, apply good SEO practices, and post them on your website. The aim is to have these blogs ranked in high positions on Google search results. Another way is to run Google Ads, meaning paying money to Google for advertising your blogs.
By doing these, you will have many people coming to your website after they search certain keywords on search engines. Once your website gets a lot of traffic, you can register for Google AdSense (subject to certain conditions and standards). Or you can register with another third party for advertisement placement on your website.
That’s how you will earn revenue online, just by blogging.
1.3. Examining the Possibility
After getting the ideas of the products, or services, and business models, you need to examine the possibilities. To be more specific, you need to pre-check whether your online business can be successful upon these ideas and make money out of them in the long term. Here are some ways to see the potential:
Carry out a market research
Find the statistics and reports about the products and services that you are planning to sell. Many companies and organizations have published a lot of documents online. You can go over these papers to partly reckon the market trends in the near future.
You can also carry out online surveys, in the form of questionnaires or interviews. The more surveys are done, the more you understand the market and your targeted customers.
Analyze potential competitors
Pick out the companies that sell the same products or services as your plan. Look into how well they are doing with their current businesses and their plans.
You can check them out on Google, or you can use certain third-party online tools to analyze their websites. These can show you some valuable insights. For instance, if a website’s traffic has increased significantly over a period of time, you can assume that the demands for products are growing, or the business is growing well.
Consult local experts
You can ask for advice from a professional who has expertise in the local market, or from someone who has already carried out your business ideas. Try to look for someone who can be trusted to give honest feedback.
2. Setting Up an Online Business in the UK
The next thing to do is setting up your online business by registering a company in the UK and opening a corporate account. Company registration is relatively easy in this kingdom. You can either do it by yourself or engage the services of professionals.
If you are non-residents, the second option is highly recommended. You don’t need to deal with complicated paperwork as well as the hassle registration process. Here is the procedure for starting a business online in the UK.
2.1. Pick the Type of Business Entity
You should aim for a corporate body to register for your online business in the UK. The 2 most preferred types are limited company and limited liability partnership (LLP).
They have many similar characteristics. They both have a separate legal status. Their members have liabilities limited only to their capital contributions. These guarantee you a high level of safety when starting your online business in the UK.
The main difference between the 2 types is taxation. A limited company is subject to a corporate tax rate of 19%. Meanwhile, an LLP is a pass-through entity. This means the owners will pay income distributed from the LLP according to their tax situations. The LLP itself is not subject to UK corporate tax.
You can choose either of them to incorporate. But in case you are wondering, here’s a helpful insight. In the UK, more than 90% of the investors have chosen limited companies over LLPs.
2.2. Choose the Company Name
When naming your UK company, please follow the following guidelines:
- The name must be unique, meaning it cannot be the same or too identical to the existing names or trademarks.
- The name should not contain any offensive meaning or sensitive words.
- The name should not be confusing to any government agency.
You must display the approved name in all signs, documents, and even on your company’s website. So, think and choose carefully. Please also consider the domain name for your online website.
If your proposed name at least satisfies the general requirements above, you are good to move on!
2.3. Use an Incorporation Service (Recommended)
Each type of business in the UK has a different set of requirements. An incorporation service will make sure that you meet all the basic requirements according to your chosen type of business entity.
The service provider will also handle the registration process, which could get complicated at times if you did it by yourself as a foreigner. When using services, all you have to do is providing certain kinds of required documents. The professionals will take care of the rest.
2.4. Provide the Required Documents
After paying for the incorporation service, you will need to supply the service provider with some necessary documents and information. Generally, they are:
- The proposed company name
- The online business activities
- The passports or address proof of all company’s members
- Other supporting documents (if needed)
Some other personal information of the members may be requested according to the request from the Companies House. It is the government agency that governs all business registration in the UK.
2.5. Get the Certificate of Incorporation
Upon the receipt of all documents, the service provider will proceed to file your application and submit it to the Companies House. The registration can be done in just 24 hours.
Normally, you can expect to receive the digital certificate of incorporation in 1-3 working days. At that time, your company will be successfully registered in the UK.
2.6. Apply for a Corporate Account
To start an online business in the UK, you will need to get a corporate account. It allows your company to receive money from customers and store the money separately from your personal account.
You can choose to apply for a bank account. However, in most cases, UK banks do not open an account for companies that have only non-resident owners. Here are some solutions that you can consider:
- Opening a bank account with a bank in another country
- Opening a business account with trustworthy financial institutions
As for the latter, you can aim for the following two:
- Wise (formerly Transferwise) – a UK-based business, or
- Payoneer – a US-based business.
Regardless of your choice, the advice is still to get help from professional services. They will make sure everything stays on track so you don’t need to spend a lot of time on paperwork.
Above is the general process to set up your online business in the UK. If you are interested in knowing more, here are the detailed steps to start a business in the kingdom!
Part 2: https://bbcincorp.wordpress.com/2021/07/28/building-sales-channels-for-your-uk-online-business/
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