It is a mistake to refuse to integrate the digital world into your firm given the enormous shift to online commerce that has occurred in the wake of the pandemic. According to research and analytics company GlobalData, the e-commerce sector in Singapore is expected to increase at a compound annual growth rate of 16.2% to US$10.7 billion by 2025, driven by shifting customer behavior.
It is simple to see why Singapore is Asia’s leader in e-commerce adoption. Over 5 million people, or more than 90% of the population of the city-state, utilize the internet. A Singaporean uses the internet for eight hours and seven minutes per day. Additionally, Singapore has among the fastest and most reliable internet infrastructures in the region.
If you are prepared, starting an e-commerce firm in Singapore shouldn’t be a difficult procedure. To be sure you are following the rules, you must carefully read the small print and minute nuances. The many processes to launching your e-commerce business in Singapore are broken out in this section.
Step 1: Research and plan
Any business starts with an idea. Conduct thorough research to know your target customers, current trends and demands, and competition. You can do this by observing how your potential competitors are doing their business, interviewing relevant sources, and reviewing documents (i.e. financial statements) that can give you an idea of the demand within your target niche.
At the end of the research, you should be able to identify the following:
- Products or services that you will sell
- Your target customers
- Potential competitors and their advantages and disadvantages
- Your business’ advantage
- A contingency plan in case something goes wrong
Once you have a solid business idea and are done with the market research, it is time to craft a business plan. This is a written document detailing your business’ roadmap, including your goals and strategies.
Step 2: Securing Funding
The next step is all about money. No matter how great your products are or how big of a demand there is for your business, none of these would matter if your e-commerce company does not have the capital to start your business.
If you have all the monetary resources to start your business and sustain it for the next six months, consider yourself lucky. But even if you don’t, there are many ways by which you can get financial assistance to get your business going.
The most common way is by taking out a loan from financial institutions like commercial banks. You can go to different lending institutions to see which offers the lowest interest rate and friendliest terms. If you are a startup, it is recommended to submit applications to different banks and see which of them would consider you for a loan.
Another option is by looking for investors. Many of today’s most successful startups were born out of brilliant business ideas with the backing of investors. The repayment terms will depend on your negotiations, but in most cases, your investors would not ask you to repay them the amount lent to you but would instead ask for a share in your e-commerce business.
Lastly, you can seek government funding to help you kickstart your online business. Some of the popular government-led grants in Singapore that you can look into are Startup SG Tech, Enterprise Development Grant, Startup SG Equity Programme, and Market Readiness Assistance Grant.
Step 3: Choose Your Business Structure and Model
There are three common business structures in Singapore. The first one is a sole proprietorship, under which the single owner has complete control over the entire business. This type is suitable for individuals with low-risk tolerance and who have limited capital. Only Singapore residents can apply for sole proprietorship; foreigners or corporations need to appoint a local manager under this.
The second type is limited liability partnership (LLP). This adopts a partnership structure where each owner’s liabilities are limited to how much they invested in the business. This structure also requires a lower cost set-up while offering liability protection. However, the owners are required to pay tax at the individual level. They also need to pay personal income tax, which is higher than corporate tax. Like sole proprietorship, LLP is for Singapore residents only.
Lastly, a private limited company (Pte Ltd) is private ownership with limited liability. Only up to 50 shareholders are allowed in this structure. This is the most ideal for entrepreneurs looking to open an e-commerce business in Singapore because of tax exemptions and other attractive benefits. Under Singapore’s new startup exemption rules, the income tax rate for private limited companies is 4.25% for the first S$100,000, 8.5% for the next S$100,00, and 17% for income above S$200,000 thereafter.
The next thing to consider is your business model. In e-commerce, your business model may be in the form of dropshipping, white-label, or manufacturing.
Dropshipping does not require business owners to keep stock of the products. Owners only serve as the storefront or the bridge between the main product suppliers and the buyers. White label refers to sourcing products from a manufacturer and then rebranding them under your business.
The biggest, albeit most complex, business model is manufacturing. This requires business owners to oversee the entire process from production to sales. It goes beyond e-commerce, requires physical factories, and entails high capital.
Step 4: Incorporate Your Business
This step involves the paperwork of setting up an e-commerce business in Singapore. The government requires the following when incorporating a business:
- Company name: Have a shortlist in case your first choice gets disapproved for reasons such as duplication.
- At least one director: He or she must be at least 18 years old, a Singapore local or permanent resident with no disqualification record on holding a directorship.
- Company secretary: This person is responsible for the communication between the company and the government. He or she will also be in charge of the documentation to ensure that the business remains compliant with government policies.
- Registered Singapore address: Even if you do not have a physical store, you should declare an address within Singapore to become a legal entity. You can avail of virtual offices or register your home address.
- Company constitution: This is where the business structure is explained, including how the shares are distributed among the owners. You also have to state your paid-up capital in this document.
- IDs: You have to submit proof of identity of all the directors and shareholders of the business.
After gathering all these documents, the next step in company registration is submitting your application to the Accounting and Corporate Regulatory Authority (ACRA). The application fee is S$315, consisting of S$15 for business name reservations and S$300 for company registration. ACRA’s processing time for these types of applications takes only a few hours.
Step 5: Set Up Your Infrastructure and Accounting System
While preparing your documents for company registration, you may also start planning and setting up your business’ infrastructure. If your plan is to sell products only on e-commerce websites like Amazon or Lazada, the infrastructure may not matter that much since the said platforms have built-in tools to facilitate end-to-end transactions.
If you want to build your own brand, hiring someone to develop a website for you is recommended. You have to consider your domain name, website host, and design. When setting up your store, you can also consider subscription-based e-commerce software like Shopify.
Another thing to flesh out in this step is your advertising and marketing strategy. There are different ways by which you can market and advertise your products and services, such as by placing an ad on social media sites and promoting your page online. You can also create a business page on Facebook to make your brand more visible to your target market. You can incorporate search engine optimization (SEO) practices for better visibility in search engines like Google for websites.
For finance-related matters, you can outsource your bookkeeping and accounting needs to an agency, do it in-house, or have a combination of both. This is very crucial because aside from keeping in check of your cash flow, these roles help ensure that your business remains compliant with the government’s tax and accounting policies to prevent any fines.