After the cost reduction in Internet services and availability of android phones at lower cost, now shopping trend of consumers has been shifted from Physical market to virtual market. Now, a days E-Commerce business is one of the growing sectors of the Economy. In past few years, there are many E- Commerce platforms are introduced in the market like Snapdeal, Amazon, Flipcart, Oyo, Zomato etc. Now, almost all goods and services are provided by these E- Commerce Platforms. And many traders/ service providers are also getting benefits with the help of these E- Commerce platforms. You can start your E-Commerce business through your own website or through these platforms (Amazon, Flipcart etc.). In this blog, we will discuss about the Process of starting E-Commerce business in India and benefits/ disadvantages of doing business through these E-Commerce platforms.
Process of Starting E-Commerce Business
Decide constitution of Business to Start: Firstly, the entrepreneur has to decide the constitution of the business-like Proprietorship, Partnership, Private Limited Company, LLP etc. Each constitution has its own benefits and disadvantages. Fund requirement of business also plays a vital role in deciding the constitution of business, like in case business requires investment in crores then Proprietorship is not beneficial. For deciding the correct constitution related to your business requirements, you should consult your Chartered Accountant to get better advice after considering your long-term vision and financial position.
Basic Registrations/ Specific License related to your Business Category: E-Commerce business is started to enlarge the scope of customer base. To increase the customer base, you have to do interstate sale for that, GST Registration is Mandatory. Further, there are many other business segments for that you require specific registration like for food business you require FSSAI license. So, you have to take care of all these registration before starting your business. In case of default, it may cause a heavy penalty on you.
Enrolment with E-Commerce Platforms: If you want to start your business with existing E-Commerce platforms like Amazon, Flipcart etc then firstly you have to enrol yourself with these E-Commerce platforms after satisfying their basic enrolment requirements. And if you want to start your business through your own website then you have to develop your website and you have to run SEO/Ads to attract customers on your website. At the starting stage, it is suggested that you start your business through existing E-Commerce Platforms to get the basic idea of how business is conducted in E-Commerce Environment.
Filing of Returns: After starting your business, you must ensure that, you are regular in Filing your returns like GST Returns, Annual returns with MCA if you have started your Business as LLP/ Private Limited/ Limited Company. Non compliance of law cost you very high.
Stock holding of Products: In E-Commerce, stock holding of product is very crucial decision. Because in E-Commerce business no one know, when you receive order of any product. Delay supply of product invites penalty from E-Commerce platforms and excess stocking of products block your capital.
Product return Policy: The biggest advantage that consumers get on E-Commerce platform is that, consumer can return product within specified time period, if he is not satisfied by purchased product. The entrepreneur must read the return policy related to its product to save himself from loss in long run.
Commission and Penalty clause of E- Commerce Platform: Setting up of E-Commerce platform requires heavy investment. E-commerce Platforms like Amazon, Snapdeal has invested huge amount on its advertisement and running these platforms and they are charging Commission from dealers for selling products through there E-Commerce Platform. The entrepreneur must ensure itself about the commission and penalty clause. In general practice, it is observed that, in case of small business, it is not business friendly to start business through these E- Commerce platforms.
Benefits of Starting E-Commerce business
- Ready to move E-Commerce platform without investing huge amount in purchasing software and creating supply chain
- No boundary to conduct business. E-Commerce platforms showcase your product to all India consumers. You can receive your product order from any part of India.
- There is no chance of default in receiving payment from consumer because these E- Commerce platforms play a role of middleman for you.
Disadvantages of doing Business through E-Commerce Platforms
- Heavy Commission is charged by these E-Commerce platforms and Penalties are very high in case of delay supply of product
- If you deal in many products there is heavy working capital requirement which may impact the growth strategy of business
- Product return policy is very crucial. Sometimes it is observed that, consumers return the product after using for 1-2 days and make the product unsuitable to be sold to another customer.
- Damage during handling of electronic items by the deliveryman, which costs vary high to the seller in many cases.
There are many others factors which must be considered while making decision whether you should start your business through E-Commerce model or not. Before starting business through E-Commerce business, you should discuss your business strategies with your Chartered Accountant/ Business Consultant because in routine practice it is observed that many businesses are started through E-Commerce platforms and they have to shutdown their business within 6 months of starting their business because their business is not suitable for E-Commerce model.
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Disclaimer: This article is for the purpose of information and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not to be used for rendering any professional advice. This article is written on the basis of author’s personal experience and provision applicable as on date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of others readers.
The Author “CA. Shiv Kumar Sharma” can be reached at mail –[email protected] and Mobile/Whatsapp – 9911303737/ 9716118384
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