It’s no secret that e-commerce has boomed into big business. Latest statistics show that e-commerce generated US$3.5 trillion worldwide in 2019, and is set to grow to US$6.5 trillion in 2022. That bears repeating, as it’s a truly staggering figure — put as a number, that’s US$3,500,000,000,000 in 2019 alone.
Even if you look at Hong Kong itself, local eCommerce revenue is projected to exceed US$5.4 billion by 2022 — it’s little wonder then that you’d want to get in on the action. Whether eCommerce is a strategic pivot for your existing company, or if you are building an eCommerce business from the ground up, read on for your guide on how to set up your own eCommerce Business in Hong Kong.
1. Choose Your eCommerce Business Model
Your eCommerce business model will depend on the product or service you are selling.
This is essentially a traditional business model with eCommerce being the endpoint for the sales, rather than a physical warehouse/shop. In a wholesale eCommerce business model, goods are sold in large quantities to smaller retail stores, who then resell them on to the general public at a higher price.
Dropshipping is a novel business model that highlights the power of the internet in international business, even for small business operators. The business does not hold any physical inventory, and therefore needs no large warehousing. In fact, the business isn’t even responsible for shipping or distribution, so logistics are not of any concern.
Essentially a dropshipping business will source a product, market it online via a website or social media. When a customer makes a purchase, the business forwards the purchase order onto their product supplier. That supplier packages the order and ships it to the customer.
The hands-off nature of this business model has made it the darling of eCommerce.
White Label eCommerce
There is no shortage of mass-produced generic products being produced, and this business model aims to take these inexpensive generic products and rebrand them with something bespoke.
For example, a white label eCommerce store might import a generic brand of scented candles, and rebrand them as an exclusive product at a much higher retail price.
While the end brand is the responsibility of the eCommerce business, the product quality and specification are up to the generic brand’s manufacturer.
The subscription eCommerce business works well for fast-moving consumer goods (FMCG) or other goods that a consumer needs on a regular basis.
The consumer subscribes to a service that provides the products, and those products are shipped to the consumer regularly (e.g. weekly, monthly, quarterly). An example of this might be subscribing to haircare products that are shipped out to the customer every month.
This model also extends to service offerings, famous examples being Netflix or Spotify.
2. Choose Your Business Entity in Hong Kong
Once you’ve chosen the right business model for your business idea, and you will need to decide on your business entity. There are many business entities available in Hong Kong, but these are the ones most applicable to small to medium eCommerce businesses.
Hong Kong Sole Proprietorship
If you are just starting out small, the most basic form of business to create in Hong Kong is a sole proprietorship. The single owner is entirely liable for profits and losses made by the business.
Hong Kong Business Partnership
A partnership is the next step up from a sole proprietorship, where two or more people join to grow a business and share the profits. There can be from two to 20 partners, and they will all usually have equal rights in the business.
Hong Kong Private Limited Company
Once a business is bigger than a partnership can handle, a Hong Kong Private Limited Company is the best choice for medium-sized businesses operating in Hong Kong. The main benefit of a Private Limited Company is it due to being a separate legal entity from its owners/shareholders. This means once those owners and shareholders are not individually liable for losses. The company’s limited liability applies in Hong Kong and Mainland China.
Hong Kong Public Limited Company
A Hong Kong Public Limited Company is suited to large enterprises that want to be publicly listed in order to grow. This is not suitable for small to medium businesses but would be the end-goal for growth.
3. Choose your eCommerce Store’s Name
Perhaps the easiest step is to pick your business’s name. The name cannot already belong to another Hong Kong company, infringe on any existing intellectual property, or be obscene or objectionable.
4. Register Your eCommerce Company
You can then register your eCommerce company online with the Hong Kong e-Registry. To do this, you will also need:
- Your company’s incorporation forms
- Copies of identification for directors/shareholders/corporate secretary where applicable
- Proof of the company’s Hong Kong office address
5. Open a Business Bank Account for Your eCommerce Company
Using the documents from the step above, you will need to acquire a Hong Kong business bank account. There are several options for this step:
Use a Hong Kong Bank
The most common option is to open a business account with a bank that has a physical Hong Kong branch. You will most likely need to prove you are doing business in Asia, as well as provide your financials for the previous six months.
Use a Hong Kong Fintech Company
Online Fintech companies have become far more mainstream in recent times, and have few restrictions that traditional Hong Kong banks. If you are turned down by a bank, a Fintech company is a good option until you can build up your financials.
There are some downsides — for example, you won’t get as many bank account options as a traditional bank.
Conclusion — What’s Next for Setting up Your eCommerce Business in Hong Kong?
There has been no better time to set up your own eCommerce business, and Hong Kong continues to offer some of the best conditions for entrepreneurs anywhere in the world.
As simple and straightforward it is to set up an eCommerce business is, there are of course some things that will require expertise.
If you’d like help jumping business hurdles, or just want to reduce the stress of the process, Incorp has a team of qualified accountants, bankers and insurance brokers to ensure your eCommerce store’s success in Hong Kong.
If you have any questions about how your business can be a success in Hong Kong, please contact us — it’s both our job and pleasure to assist.