Last updated on January 4th, 2023 at 10:02 am
An e-commerce business is any business that operates entirely through the internet. Any Ecommerce business will digitally transfer money and data to execute these online transactions.
Starting an online Business in South Africa can be a great way to make money through the internet. It’s also one of the best ways to increase the turnover of your existing retail business or a starting point from which to grow an online retail empire.
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eCommerce industry overview in South Africa
Online sales in South Africa increased by 66% from 2019 to 2020 to more than $1.8 billion (ZAR30 billion). Many South Africans are spending more time online researching better prices and seeking product recommendations on social media. With this information, we can say that now is the best time to start an online business in South Africa.
If you’re a skilled entrepreneur or craftsperson and you’ve probably dreamed of starting your eCommerce store in South Africa, you will learn each step in this guide.
Just like starting any business, learning how to start an eCommerce business isn’t easy. However, setting up, launching, and maintaining sites where entrepreneurs, designers, and creators of all sorts can sell their wares is more attainable now than ever.
We will break down how to start an eCommerce business in seven simple steps so that you have all the information you need to get your online business up and running in no time.
How to start an eCommerce business in South Africa
1. Research the e-commerce space and find your product
2. Research your competition and write a business plan.
3. Choose your logo and business name and set up your online store.
4. Apply for an EIN
5. Obtain business permits and licenses
6. Choose your shipping strategy and set sales and Marketing goals
7. Launch your business.
1. Research the e-commerce space and find your Product
Just like starting any other business such as a restaurant, where you have to look into different locations, food options, and themes. You need to do an investigation on your e-commerce area of interest and make a decision on what kind of business you want to venture in.
You will want to consider what exactly your e-commerce business is going to offer. Are you going to sell products or services? If you will be selling products, are they physical or digital? Where are you going to source your products? How will you get your products or services to customers?
Think about the type of business model you want to make use of. Are you going to offer single products, packages, subscriptions, or something else? These questions are important to the beginning of your business and will help you start to create and write your business plan.
This process will give you a better sense of your goals and what you need to reach them.
Although the growth of the e-commerce industry in South Africa is a great benefit for those looking to start an eCommerce business, it also means more competition. You will need to do competitor research and find a space where you think you can establish your brand.
2. Research your competition and write a business plan.
You have done your research on e-commerce products, chosen your niche, and sourced suppliers. But it’s not time to get started yet, you need to do thorough research on your competitors.
This will help you understand what you are up against and how you can make your business stand out from your competitors.
Once you understand your competition, the next step is writing your business plan. Think of a business plan as a roadmap that helps you bring your ideas and thoughts together.
A business plan will help you determine what to prioritize and how to effectively reach potential customers. Investors and employees will also know the core values of your brand through your mission statement in the business plan.
3. Choose your logo and business name and set up your online store.
Determining your business or brand name and choosing an appropriate and available domain name are very crucial. Select a simple and unique name for your business and register your domain. Learn how to register a domain here.
Once you’ve registered your domain, it’s time to craft a simple logo for your online business. You also need to understand the basics of search engine optimization so you can properly structure your site and pages for Google and other search engines.
After understanding search engines, it’s time to build out your store using a website builder. You will need a website and this does not require you to have any coding or design skills. The website builder makes creating and customizing a website easy enough for anybody to do it.
To reach potential customers, you have to choose sales channels where they already shop. The right mix of sales channels will depend on your products/services and your target market.
4. Apply for an EIN
Apply for an EIN (employer identification number) for your e-commerce business in South Africa.
Although not all business entity types are required to have an EIN in South Africa, this number can be useful to help you separate your personal and business finances.
Since you are starting an eCommerce business, you can apply for this business tax ID online, and receive your number instantly.
5. Obtain business permits and licenses
After applying for your EIN, you will now need to obtain any business licenses or permits needed to operate legally in South Africa.
However, if you have established your e-commerce business as a sole proprietorship or general partnership, you don’t need to register your business.
For the other business entity types, you will need to register your business and receive a general operating license.
However, most e-commerce businesses are home-based, and they do not require as many business licenses and permits as brick-and-mortar stores.
6. Choose your shipping strategy and set sales and Marketing goals
Shipping Strategy
As you get closer to launching your online business, there are several shipping and fulfillment elements you need to prepare for. Choosing what shipping rates to offer your customers is an important part of setting up your online business.
Before you take your first order, you need to decide what shipping strategy you want to use, and then set up how customers can choose a shipping method.
Your shipping strategy might change over time as your store grows. One of the first decisions you will need to make is how much to charge for shipping within and outside South Africa.
Define your KPIs
It’s also a good idea to define your key performance indicators (KPIs) upfront so, that once you launch, you know what measures of success to track. Without KPIs, you’ll be forced to resort to gut reactions, personal preferences, or other unfounded hypotheses which are dangerous to your business.
One person’s intuition can’t be relied upon when your business grows. If something goes wrong, you won’t know why.
You might feel like things are going well, only to find your business is on the edge. Meanwhile, your more organized business competitors will leave you in the dust.
If you don’t understand the outcomes of your strategies, you won’t be able to develop your business effectively and strive toward achieving your goals.
The true power of KPIs lies in your ability to interpret the data and draw out actionable insights which can help you to improve your eCommerce business.
With that, you can achieve long-term success by consistently taking the optimum actions.
Marketing Goals
Think about marketing your eCommerce business in terms of three main audiences:
- People who have shopped from you before or at least know about your store
- People who are looking for the kind of product that you are offering
- People who would want the product you are offering.
These approaches can help you think about your different marketing strategies and how to divide your time and budget.
People who know about your business should have a direct line to your business, either through email, content marketing, or social media platforms.
You should communicate with them when necessary, especially when you have new stock or when you have crazy offers.
For the people looking for the products you offer, find ways for them to discover your products. This can involve search engine optimization (SEO), content creation (like blogging or youtube), and search engine marketing.
Lastly, for the group that might want the product you are offering, you will need to think in terms of brand awareness.
Are you trying to solve a problem they don’t know about yet? Or is your target audience using your competitor’s solution? The answers you get will have a big impact on how you approach your marketing.
7. Launch your business.
Now that you have set up your store and analyzed your marketing strategies, your next step is launching your business.
An eCommerce business can be started from as little as $100, which is spent on a subscription and purchasing a theme for your online store.
New eCommerce store owners in South Africa can expect business costs to total up to $40,000 in the first year, which is paid back through profit margins.
Expense categories included:
- Product: raw materials, inventory, supplier, patents, etc.
- Operating: incorporation/legal fees, additional software, business insurance, accounting, etc.
- Online store: website/platform subscription, hosting/domain, contract developer/designer, etc.
- Shipping: packaging, labels, etc.
- Offline: stall/table fees, rent, gas, etc.
- Team/staff: salaries, benefits, etc.
- Marketing: your logo, branding, ads, printed materials, business cards, etc.
NOTE: Starting a successful eCommerce business in South Africa is a marathon. Don’t measure business success by profitability in your first year in business.
Give yourself a runway of 18 to 24 months for your eCommerce business to get off the ground. Spend your first year testing, reiterating, and reinvesting your sales back into the business.
Conclusion
Starting an eCommerce business in South Africa is exciting and at the same time challenging.
In this guide, you have learned a lot about eCommerce research, business plan, setting up your store, business permits, choosing shipping strategy, marketing, and how to launch and sell to new customers.
The process can feel like you’re solving a head-scratcher of a puzzle, but its benefits are worth the struggle.
We hope by following this guide you will get a clearer roadmap on how to start your eCommerce business in South Africa. The best advice we can give you is to just get started and to enjoy yourself along the way.
