Setting up an online business in the UK is an increasingly popular option for both startups and established ‘bricks-and-mortar’ retailers. With more consumers than ever before now choosing to shop online, the UK has the largest e-commerce market in Europe and the third largest in the world.
The Coronavirus crisis has further accelerated the shift toward online shopping, even amongst the traditionally reluctant demographics, resulting in e-commerce sales as a proportion of all retail purchases in the UK reaching an all-time high of 22.3% in March 2020.
With minimal start-up costs and the potential to reach consumers all over the world, starting an e-commerce business has obvious appeal. Whilst many physical retail stores will gradually reopen as social distancing restrictions are eased, a return to ‘normal’ is a long way off.
Indeed, many of the changes we’re seeing in shopping preferences and behaviour are predicted to last, leading entrepreneurs and existing businesses to explore innovative ways to sell online, adapt to the changing needs of consumers, and stay relevant during these challenging times.
Whatever your reasons for wanting to set up an online business in the UK, whether you plan to sell on Amazon or through your own e-commerce store, there are a number of important steps that you’ll need to take to turn your business idea into a reality.
1. Conduct market research
Conducting market research is an essential first step when starting any kind of business venture. The insight you will gain from this type of research is key to building a solid foundation and maximising your chances of success.
Effective market research will help you to:
- identify your target audience
- determine whether there is demand for your product(s) or service(s)
- identify and evaluate existing competition
- reveal gaps and potential business opportunities in the market
- identify, monitor, and respond to economic shifts and trends
- understand how your potential customer base feels about your products or services
- make informed decisions about product pricing, payment options, and delivery strategies
- establish how your prospective customers shop, how to reach and communicate with them, and how to sell to them
- identify potential problems and minimise the risk of loss
- develop effective marketing and growth strategies
- create a business plan
There is a great deal to learn about the market you’ll be entering before launching your business, but it’s also important to utilise market research as an evaluation tool throughout the life of your business.
By doing so, you will be able to track your progress, monitor competitors and economic trends, and respond to the changing needs and expectations of the consumer.
2. Register your online business
To run a business in the UK, you must officially register a legal business structure. The two most popular options are sole trader and limited company. If you live in the UK, you can choose either structure. If you are a non-UK resident, however, you will need to set up a limited company.
A limited company is generally considered to be the best business structure because it provides a number of unique benefits, including:
- limited personal liability for business debts
- a professional and credible image
- the opportunity to minimise your personal tax liability
- can be set up and owned by one person or multiple individuals
- access to more tax reliefs and allowances
Company formation in the UK is an incredibly straightforward and inexpensive process. Everything is done online, there is no paperwork to sign, and all company registration documents can be provided in digital format, making it an ideal solution for non-UK residents who wish to set up a UK business from overseas.
At Rapid Formations, you can set up a limited by shares company from just £12.99. The application form generally takes around 10 minutes to complete, expert help and advice is available throughout, and most companies are registered (‘incorporated’) and ready-to-trade on the same day.
We also provide a bespoke Non-Residents Company Formation Package, which includes a prestigious London registered office and business Address, VAT registration, and a UK business bank account.
3. Set up a business bank account
Whether you decide to operate as a sole trader or set up a limited company, you will need a business bank account. Whilst it’s not a legal requirement, we highly recommend that you keep business finances completely separate from your personal finances.
First and foremost, a dedicated business bank account in your company name will provide assurance to customers that your business is legitimate. On a practical level, a separate business bank account will make it much easier to monitor cashflow, identify transactions, and maintain accurate accounting records.
4. Create your website
The next step in the process is to create a website for your new online business.
Even if you only plan to sell your products through an online marketplace like Amazon, eBay, Etsy, or Not On The High Street, rather than setting up your own e-commerce shop, a website is still an incredibly important tool for marketing and promoting your business, providing important information about your brand and products, and reaching a wider audience.
To create a website or online store, there are two main options. You can either pay a professional web developer to do it for you, or you can take the DIY approach using a website builder. The latter is the most affordable and popular solution for small businesses.
Whatever approach you take, it is absolutely essential that your website is secured using an SSL Certificate. Additionally, given that more than 50% of online traffic now comes from mobile devices and via mobile apps, it is important that your website is mobile responsive.
If you choose to design your own website, the key elements to bear in mind are aesthetics, functionality, and user experience, so it must be pleasing to the eye, easy to understand, and simple to navigate. Essentially, whatever the purpose of your site, users should be able to achieve it with minimal effort and zero stress, otherwise they’ll simply go elsewhere.
Before you can launch your website, you will need to register a domain name. This will be your website address, so it is best to choose a domain that is short and simple, matches the name of your business, or includes keywords that describe what you sell.
By doing so, your business will be easier to promote and easier to find online, which will help to drive traffic to your site. It’s also important to use an appropriate domain name extension like .com or .co.uk
5. Choose how to take payments
If you’re setting up an online business in the UK, you’ll need an electronic payment system to be able to take payments online. There’s a huge selection of third-party payment processors to choose from, such as WorldPay, Stripe, Paypal, Shopify, and SagePay.
There are many factors to consider when deciding on the best payment processing solution for your online business, including fees and pricing options, ease of set-up and management, what cards and types of payments are accepted, and the reputation of the provider.
So it’s important to do your research to ensure the needs of your business will be met now and in the future.
Now that we’ve covered the basic steps required to start an online business in the UK, you’ll hopefully have a better understanding of the initial process and whether it is something that you wish to pursue.
Whilst starting a new business in the current climate may feel highly counter-intuitive, dramatic changes in consumer trends have created an entirely new kind of demand that none of us could have predicted.
Coupled with significant acceleration toward online shopping, the emerging changes in customer preferences and shopping behaviour present a number of commercial opportunities for innovative and determined retailers to close the sales gap through digital offerings.