Why you should start an e-commerce platform in Hong Kong in 2019

Hong Kong’s economy is the fastest growing among developing countries as it ranks 15 in the world e-commerce index

With stats reviewed from Statista showing revenue of US$4.4 billion on e-commerce alone in 2018, it’s only fitting that 2019 would be a good year to start an e-commerce platform.

Hong Kong has a large domestic sector which provides long term opportunities, an attractive option for entrepreneurs, availability of formation agents, lower tax laws and high web traffic.

The consumer behaviour towards virtual and physical stores is a challenge most e-commerce start-ups face as some consumers tend to cling to traditional ways of purchasing goods.

Nonetheless, great opportunities still await. E-commerce is a revolutionary platform for the world of business.

It provides a bridge between businesses and consumers which helps to fill the gap that traditional business practices lack.

Statista states that the practice of e-commerce in Hong Kong has bloomed in a way that the revenue gained from e-commerce alone is expected to garner US$4.4 billion in 2018.

Taken from Statista

The statistics had also predicted an increase of eight per cent (approximately US$6.4 billion of revenue) on e-commerce platforms by 2023.

This shows that there is a US$2 billion worth of revenue still up for grabs which is a great indicator for e-commerce startups and other mature platforms to gain a piece of the action.

Here are 5 concrete reasons why 2019 is the best time to set up shop in Hong Kong’s internet economy

1. A considerable annual growth rate

Hong Kong is known to have a large e-commerce sector which caters to a variety of sectors from electronic goods to media to other miscellaneous items.

These sectors include personal items from toiletries, care products and investment opportunities via B2B transactions to vast markets.

All patronised from Hong Kong’s 5.5 million users, based on the reviewed statistics from Statista.

According to the UNCTAD B2C E-commerce Index 2018, Hong Kong is ranked number 15 which is quite impressive compared to other Asian countries.

This shows that Hong Kong’s economy is growing faster than in other developing countries.

This rank also shows that e-commerce provides the greatest influence on the economic development of Hong Kong.

Therefore, this is a clear indicator that the potential for online retail stores in Hong Kong is significantly increasing — something entrepreneurs are likely to take advantage of.

Taken from UNCTAD.org

In other words, the poverty rate for Hong Kong is decreasing, giving them a higher purchasing power which makes 2019 a great year to get into Hong Kong’s e-commerce.

2. Tax is lower compared to other countries

Hong Kong only places taxes on the profits that businesses earn within Hong Kong’s jurisdiction.

In other words, earnings which are direct activities and incomes earned by the businesses in Hong Kong will be taxed, while businesses who deal in Hong Kong but earn their income away from Hong Kong’s jurisdiction will not be taxed.

Hong Kong does so because e-commerce platforms have propelled their economy thus reducing the poverty rate which provides opportunities for both the locals and foreign entrepreneurs.

Based on research by Guide Me Hong Kong, Hong Kong’s taxation jurisdictions are on the “territorial principle” which entrepreneurs tend to take advantage of as they are able to gain higher profits by sourcing goods from Hong Kong and selling them overseas.

This technique can be easily adopted by startup e-commerce entrepreneurs to make a quick buck as soon as they are operational.

3. Low Investment cost and an attractive option for entrepreneurs

E-commerce presents a great opportunity for businesses to compete globally.

Although the entrepreneurs are relatively a pawn in the game, forming an e-commerce platform is encouraging and effective as it not only helps the businesses globally but also bypasses the gradual steps which traditional businesses face before implementing their strategies.

For example, market knowledge and competition scanning.

With the e-commerce platform, information-like culture, target segments and present competitors’ information can easily be accessed at the touch of a button.

According to Laurie Chen from “China Business”, Hong Kong is a destination gold mine for entrepreneurs not only of the low risks but mainly for the dynamic environment.

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This dynamic environment is due to Hong Kong being near the bay area which is known for its agriculture and playing host to telecommunication giants Tencent and Huawei.

Entrepreneurs are able to observe and perhaps learn a thing or two from the professionals in which they can apply to their businesses.

4. Availability of Hong Kong company formation agents

Formation agencies are agencies which help guide e-commerce entrepreneurs to set up their platforms through the internet.

Hong Kong provides agents who help the entrepreneurs make their lives easier by providing guidance with questions and difficulties — eliminating barriers faced by most foreign entities when trying to go global.

According to the “Low-Cost Corporate Services”, an e-commerce platform agent in Hong Kong, starting up an online business platform is fast and simple with such services which include foreign currency exchange, web creation support and transfer services.

5. High web traffic presence

A recent study by Go Globe shows that majority of the consumers in Hong Kong spend hours of their time shopping online.

It is found that consumers in Hong Kong spend more than 24 hours a week on the Internet alone.

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Based on the reviewed research by Statista, the e-commerce platform has gained an average revenue per user (ARPU) of US$ 798.17 from its 5.5 million users in 2018. In 2019 the ARPU is expected to increase to US$ 871.14 followed by an increase to US$ 1,115.07 by 2023.

The considerably high traffic of internet users, as well as the increase in ARPU in Hong Kong, is a great indicator for startup entrepreneurs given the low cost in starting a local online platform.

Plus, the ability for entrepreneurs to penetrate the market more efficiently with regards to time, cost and penetration efficiency is sound.

The reason being, records have clearly shed light on locals purchasing power indicating a high probability for more visitors to the online retail store and making a purchase on the spot.

The challenges and potentials of Hong Kong’s digital economy

Despite the high e-commerce potential in Hong Kong, it goes without saying that there will be big challenges that follow.

According to a study by KPMG, one of the challenges that e-commerce businesses could face while setting up in Hong Kong is the consumer’s purchasing behaviour.

Local consumers might still adopt and prefer a more traditional approach when purchasing goods or services. Some consumers tend to prefer being physically present at a specific moment as they can experience the service or product on the spot without hesitation.

This is mainly about a matter of trust.

Consumers are cautious when it comes to spending their hard earned money on a product that can help to improve their life.

Therefore, before purchasing a product, consumers tend to have the urge to test out or experience the quality of the product before making a decision.

Luckily, more can be done by businesses and entrepreneurs to improve their consumer’s trust in e-commerce such as improved consumer experience and customers service.

This can be done by implementing additional features such as trusted payment gateways like “AliPay”, promoting its consumer protection features and initiating campaigns that promote e-commerce’s trustworthiness.

For example, terms and conditions like a specific delivery date and time should be applied with compensation for delivery services which exceeds the agreed time. Doing so would provide a sense of ease towards the customers and promotes reliability along with it.

Furthermore, GPS tracking features are a great way to inform the consumers about the whereabouts of their order.

On the other hand, another way e-commerce platforms are able to gain trust from the consumers is through campaigns.

Campaigns promoting security are a great way to encourage them to create more visits to the online retail store.

Players in Hong Kong’s e-commerce market must work closely with search engine optimisation (SEO) specialists to create a platform that improves consumer’s trust. Businesses can easily engage with specialists such as the Low-Cost

Corporate Services for SEO assistance to optimise their websites.

More importantly, businesses must realise that the digital space is an additional marketing channel rather than a threat to physical stores.

Digitalising their approach to shopping doesn’t necessarily mean that they should ditch their physical store but rather, have both complement each other.

In a nutshell, great opportunities await Hong Kong’s e-commerce sector as it is set to become a US$6.4 billion revenue industry by the year 2023. It is up to businesses to take up the chance and cash in on the industry’s billion-dollar opportunity.

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