How To Start An Ecommerce Business In India

The e-commerce industry is witnessing a tremendous growth in India backed by increasing smartphone and internet penetration. With further increase in internet service providers and the launch of 3G and 4G services, at affordable prices - the e-commerce and m-commerce industries are set to record even higher growth. In this article, we look at the procedure for starting a successful eCommerce business in India.

Setting up an eCommerce business

Business conducted over the internet is called eCommerce. In recent years, m-commerce or mobile commerce - business conducted through smartphones has become very popular. Currently, there are two main modes to starting an eCommerce business, a proprietary eCommerce website or joining an established marketplace.

Creating a proprietary (own) eCommerce website

Creating a proprietary eCommerce website is one of the hardest methods of starting an eCommerce business. Starting a proprietary eCommerce business requires a web development team, online marketing team and a payment gateway for receiving payments. Starting a proprietary eCommerce website is a long-term initiative and requires a good amount of investment in terms of money and effort to build up a successful business.

Joining an established marketplace

Joining an established marketplace is an easy way to start an eCommerce business or sell products/services online. Joining an e-commerce marketplace as a seller often requires only a bank account and GST registration, making the process easy and simple. Further, on an eCommerce or m-commerce platform aspects such as technology development, marketing, payment gateway, logistics, etc., are taken care of by the marketplace platform, reducing the workload on the seller. In addition, sellers can often join multiple marketplaces and sell their products, making it the easiest way to start an online or eCommerce business.

Some of the popular eCommerce or m-commerce marketplaces are:

Flipkart
Amazon
Snapdeal
Shopclues
PayTM

The following articles provide more information about selling on popular eCommerce marketplaces:

How to sell on Flipkart
How to sell on Snapdeal
How to sell on Amazon India
How to sell on PayTM

Legal Formalities for Starting an Ecommerce Business

To start an eCommerce business, proprietary eCommerce website or become a seller on a marketplace, the following registration is required:

Company or LLP Registration

While starting an eCommerce venture it good to have a company or LLP to have limited liability protection and improve the ease of doing business. Having a company or LLP would ensure that the opening of bank accounts in the name of the business or obtaining a GST registration are easy and fast.

Almost all marketplaces allow Proprietorships and Partnership firms to sell on their website. However, there would be no limited liability protection in case of litigation. Hence, it is best to start selling with an LLP or Company.

In case the promoters wish to start a proprietary eCommerce website, then it is best to start with a Company, as it is the only type of entity that can allow for angel funding or equity funding - a must for successful eCommerce ventures.

GST Registration

GST registration is a must for becoming a seller on an eCommerce portal or while starting a proprietary eCommerce website.

Bank Account

Once the Company or LLP is incorporated, a bank account can easily be opened in the name of the business by contacting a Bank. In the case of Proprietorship firm, GST registration must first be obtained to open a bank account in the name of the business. Opening of bank account is essential to list on an eCommerce marketplace or obtain payment gateway for a proprietary eCommerce website.

Payment Gateway

A payment gateway would be required for a proprietary eCommerce website to process customer payments. The payment gateway provides allow for the website to accept credit card, debit card, net banking, internet banking payments from multiple banks and credit card companies. Therefore, one payment gateway is sufficient to accept many forms of online payments. Once, a payment is received from the customer, the payment is sent to the bank account of the business by the payment gateway provided in one or two business days. Read the article on "how to get a payment gateway" to know more.

In case of selling through online marketplaces, the marketplace would accept the payment through their payment gateway and credit the money to the bank account of the seller directly. Hence, it does not require a payment gateway and only a bank account is necessary.

Legal Documents

While selling online, it is important to protect the business and the promoters of the business through the proper use of terms and conditions document and privacy policy. In case of a proprietary eCommerce website, the terms and conditions, disclaimer and privacy policy would have to be drafted by the business based on the nature of its activities and products sold online.

If the business sells through online marketplaces, then the legal document or sellers agreement is provided by the marketplace and the seller must abide by the sellers' agreement. It is important for any business to read the sellers agreements before agreeing to the agreement.

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Frequently Asked Questions

Common questions about Starting an Ecommerce Business in India: Key Considerations.

There are two main modes to start an eCommerce business in India - creating a proprietary eCommerce website or joining an established online marketplace like Flipkart, Amazon, Snapdeal, etc. Joining a marketplace is generally easier and requires less investment compared to building your own eCommerce website from scratch.

The main legal formalities required to start an eCommerce business in India include registering a company or LLP for limited liability protection, obtaining GST registration for selling products/services online, and opening a business bank account to receive payments. Having proper legal documents like terms and conditions, privacy policy is also essential.

While it is possible to start selling on some marketplaces as a proprietorship or partnership firm, it is recommended to have a company or LLP registration for limited liability protection and ease of doing business. Having a company is almost a necessity if you plan to build your own proprietary eCommerce website and seek external funding.

If you have your own eCommerce website, you will need to integrate a payment gateway to accept online payments like credit cards, debit cards, net banking, etc. If you are selling on a marketplace, the platform will handle payment processing, and you only need to provide your business bank account details.

No, you do not need to have a separate payment gateway if you are selling on an established online marketplace like Flipkart or Amazon. The marketplace will handle payment processing through their own payment gateways, and you only need to provide your business bank account details.

Some of the popular eCommerce or m-commerce marketplaces in India to sell products include Flipkart, Amazon, Snapdeal, Shopclues, and PayTM. The article provides links to resources on how to become a seller on these platforms.

Yes, GST registration is a must for becoming a seller on an eCommerce portal or while starting a proprietary eCommerce website in India. Obtaining GST registration is one of the legal formalities required to start an online business.

Joining an established online marketplace like Flipkart or Amazon has several advantages, such as not needing to develop your own website, payment gateway, logistics, or marketing infrastructure. The marketplace takes care of these aspects, reducing the workload and investment required from the seller.

Yes, one of the advantages of joining established marketplaces is that sellers can often list and sell their products on multiple platforms simultaneously, increasing their reach and sales potential.

For a proprietary eCommerce website, it is important to have proper legal documents like terms and conditions, disclaimer, and privacy policy drafted based on the nature of the business and products sold online. These documents help protect the business and its promoters.