Starting An Online Business In The UK For Beginners

Starting an online business in the UK can be a great idea! According to the official national statistics, Internet sales accounted for 30.2% of the total UK retail sales (both goods and services). It is projected that the trend will continue to go up in the coming years.

On a global scale, the figure for online sales is also considerably high. In 2022, although with the effect of the pandemic, retail sales from e-commerce alone remain a high portion worldwide.

The statistics have shown a huge financial potential of an online business in the UK. More and more people are in favor of making their orders online and setting up an online business is now easier than ever before. Here is what you need to do to begin your own online business in this prosperous kingdom.

Getting Ideas for Your Online Business in the UK

Everything starts with a simple idea. Try to figure out what kind of goods or services you want to offer online, in the connection with whom, and where you will sell those products.

Below are some popular business models that you can apply to your UK online business.

Business Models for E-commerce

The explosive growth of e-commerce is undeniable all over the world and also in the UK. If you plan to sell your products on the Internet, here are some models that you can consider:

Traditional online store

You manufacture your products, store them, advertise them on your website (or other channels), and sell them to customers.

Dropshipping

This business model has been applied worldwide. It is suitable if your company runs a retail business. Here is how it works:

• Customers make their orders with you (through your website or other channels).
• You send the orders straight to your supplier.
• The supplier will process and ship the products directly to the customers.

You will make profits on the price difference. For instance, a lamp from a supplier costs you $5, you sell it to customers for $10, and you make a profit of $5 each.

The advantage is you do not have to worry about order fulfillment, as long as you work with a good supplier or distributor. Your business’s main focus is to build efficient online channels, attract customers, and persuade them to place an order (by creating helpful content to introduce your products for example).

On the other hand, the drawback is you have no control over the supply of goods, but still take responsibility for them. If the products are damaged or cannot meet the customers’ expectations, the bad reviews are on your business.

Therefore, choosing good suppliers of products carefully is the essential step to building an efficient dropshipping business. Here are some recommended dropshipping suppliers worth putting in your list:

• Avasam
• Spocket
• Syncee
• Printful
• Oberlo

However, there are still many other good suppliers you can select for your business depending kinds of products you want to sell. The thing is that you must check if they are trustworthy and meet your criteria.

Wholesaling and warehousing

With this model, you will make bulk orders with a supplier, then store the products in a warehouse. When customers purchase on your website, you will directly ship the products to them from your warehouse.

This business model can work well for both B2C and B2B businesses. If your business sells directly to consumers (B2C), it can help you reduce the input cost because you order in bulk. This means you earn more profits when selling products to individual customers, compared to dropshipping.

In case your business sells to other businesses (B2B), wholesaling and warehousing help you to fulfill their needs as businesses will normally place bulk orders with you. The profit per product will be lower, compared to when you sell to individual customers. However, the large orders will make up for this.

There are certain issues that you should consider when aiming for this business model. The first thing is the warehouse. You could construct your warehouse or rent one. In either case, it would cost you a significant amount of money.

The second matter is finding sufficient customers. Buying goods in bulk for storage would cost you major expenses. If you cannot find enough customers, these expenses can turn into a big loss.

White Labeling

White labeling means you will work with an original equipment manufacturer (OEM). OEM is a unit that makes parts of the products or the whole products for a company.

You will get the supplies from your partnered manufacturer and sell them to your customers. The advance is that you are allowed to put your brand name and logo on the products. This will make it feel as if you are the actual manufacturer.

This business model will help you reduce the cost of production since you don’t need to invest a huge amount of money to build up your factory or any manufacturing facilities.

However, you will not have control over the idea, concept, material, and process of production. The third-party manufacturer will handle all of these. Your mission is to find products that sell well on the market. You will also need to create efficient sales channels, customer service, shipment, and other marketing strategies.

Private Labeling

Private Labelling is similar to white labeling in the way that you will buy your products from a third-party or contracted manufacturer. The products will also carry your business brand on them.

The difference between private and white labeling is that private labeling allows you to have control over production. You get to specify everything throughout the process, from the idea, materials, appearance, and package, to the quality of products. The manufacturer will work exclusively according to your requirements.

This business model is the best fit for starting your online business in the UK with innovation. A unique product can make your business very competitive in the market. But in return, there will be quite a lot of work that needs to be done. Besides all the work listed above (in other business models), you will also need to focus on designing your products and planning the production.

Other Common Business Models

Do you want to know more? Here are some other basic but popular models that you can adopt:

Subscription

With this model, customers will register to get access to certain online services of your business. They will then have to pay regularly to maintain the services. Netflix is an example that is currently doing great with this business model.

Premium

Your customers will be allowed to use the products or services of your business, but only to a certain extent. To use exclusive or advanced features of these services, they have to pay additional fees. Mailchimp and LinkedIn are case studies for this type of business.

Brokerage

Applying the brokerage model, your online business acts as a middleman which connects the buyers and sellers in a community. Your mission is to create an online marketplace or platform that attracts as many buyers and sellers as possible. It should be convenient, easy to use, and user-friendly.

Advertising & Affiliate

This is a very simple way to earn money online. Other companies and individuals will pay you if they want to place a piece an advertisement on your business channels.

You can also promote products from other sellers on your channels. Every time a customer buys such products through a link on your channels, you will get a commission from the sellers. This is called affiliate marketing.

At the simplest level, your company needs to build a network of website(s) and social media. The mission is to attract as many people to visit these channels as possible. The more visitors there are the more views the ads get, and the more money you can earn from your clients.

Here’s how many people do it. You write a bunch of blogs, apply good SEO practices, and post them on your website. The aim is to have these blogs ranked in high positions on Google search results. Another way is to run Google Ads, meaning paying money to Google for advertising your blogs.

By doing these, you will have many people coming to your website after they search certain keywords on search engines. Once your website gets a lot of traffic, you can register for Google AdSense (subject to certain conditions and standards). Or you can register with another third party for advertisement placement on your website.

That’s how you will earn revenue online, just by blogging.

Determination of your business idea feasibility

After getting the ideas of the products, or services, and business models, you need to examine the possibilities. To be more specific, you need to pre-check whether your online business can be successful upon these ideas and make money out of them in the long term. Here are some ways to see the potential:

Carry out a market research

Find the statistics and reports about the products and services that you are planning to sell. Many companies and organizations have published a lot of documents online. You can go over these papers to partly reckon the market trends soon.

You can also carry out online surveys, in the form of questionnaires or interviews. The more surveys are done, the more you understand the market and your targeted customers.

Analyze potential competitors

Pick out the companies that sell the same products or services as your plan. Look into how well they are doing with their current businesses and their plans.

You can check them out on Google, or you can use certain third-party online tools to analyze their websites. These can show you some valuable insights. For instance, if a website’s traffic has increased significantly over a while, you can assume that the demand for products is growing, or the business is growing well.

Consult local experts

You can ask for advice from a professional who has expertise in the local market, or from someone who has already carried out your business ideas. Try to look for someone who can be trusted to give honest feedback.

Setting Up an Online Business in the UK

The next thing to do is set up your online business by registering a company in the UK and opening a corporate account. Company registration is relatively easy in this kingdom. You can either do it by yourself or engage the services of professionals.

If you are a non-resident, the second option is highly recommended. You don’t need to deal with complicated paperwork as well as the hassle registration process. Here is the procedure for starting a business online in the UK.

Pick the Type of Business Entity

You should aim for a corporate body to register for your online business in the UK. The 2 most preferred types are a limited company and a limited liability partnership (LLP).

They have many similar characteristics. They both have separate legal statuses. Their members have liabilities limited only to their capital contributions. These guarantee you a high level of safety when starting your online business in the UK.

The main difference between the 2 types is taxation. A limited company is subject to a corporate tax rate of 19%. Meanwhile, an LLP is a pass-through entity. This means the owners will pay income distributed from the LLP according to their tax situations. The LLP itself is not subject to UK corporate tax.

You can choose either of them to incorporate. But in case you are wondering, here’s a helpful insight. In the UK, more than 90% of the investors have chosen limited companies over LLPs.

Choose the Company Name

When naming your UK company, please follow the following guidelines:

• The name must be unique, meaning it cannot be the same or too identical to the existing names or trademarks. You can check if your desired name is the only one in the UK Company Houses here.
• The name should not contain any offensive meaning or sensitive words.
• The name should not be confusing to any government agency.

You must display the approved name on all signs, documents, and even on your company’s website. So, think and choose carefully. Please also consider the domain name for your online website.

If your proposed name at least satisfies the general requirements above, you are good to move on!

Use an Incorporation Service (Recommended)

Each type of business in the UK has a different set of requirements. An incorporation service will make sure that you meet all the basic requirements according to your chosen type of business entity.

The service provider will also handle the registration process, which could get complicated at times if you did it by yourself as a foreigner. When using services, all you have to do is provide certain kinds of required documents. The professionals will take care of the rest.

Provide the Required Documents

After paying for the incorporation service, you will need to supply the service provider with some necessary documents and information. Generally, they are:

• The proposed company name
• The online business activities
• The passports or address proof of all company members
• Other supporting documents (if needed)

Some other personal information of the members may be requested according to the request from the Companies House. It is the government agency that governs all business registration in the UK.

Get the Certificate of Incorporation

Upon the receipt of all documents, the service provider will proceed to file your application and submit it to the Companies House. The registration can be done in just 24 hours.

Normally, you can expect to receive the digital certificate of incorporation in 1-3 working days. At that time, your company will be successfully registered in the UK.

Apply for a Corporate Account

To start an online business in the UK, you will need to get a corporate account. It allows your company to receive money from customers and store the money separately from your personal account.

You can choose to apply for a bank account. However, in most cases, UK banks do not open an account for companies that have only non-resident owners. Here are some solutions that you can consider:

• Opening a bank account with a bank in another country
• Opening a business account with trustworthy financial institutions

As for the latter, you can aim for the following two:

• Wise (formerly Transferwise) – a UK-based business, or
• Payoneer – a US-based business.

Regardless of your choice, the advice is still to get help from professional services. They will make sure everything stays on track so you don’t need to spend a lot of time on paperwork.

Building Sales Channels for Your UK Online Business

You have your UK company established and product supply ready. Now your business needs to make its presence online.

Create an Online Store on Third-party Platforms

If you don’t want to build your website yet, you can consider registering an online store on e-commerce platforms. It is a good way to kick-start the initial stage of your business.

The two biggest e-commerce platforms in the UK are Amazon and eBay. You can go over some other popular platforms here.

Once you register your online store, your business can start right away. Certainly, there will be chargeable fees since you are selling on their platforms. However, these platforms have huge virtual marketplaces which can bring many customers to your business. Moreover, they can further assist you in other aspects such as content management tools and payment methods.

Some platforms are capable of building e-commerce sites for your online business. Shopify is one popular example. Using their available templates and drag-and-drop tools, you can easily design and build up your sites from scratch, integrated with up to 100 payment gateways (PayPal included).

Amazon can even handle order fulfillment for your business with their FBA services. You prepare your products, send them to Amazon inventory and let them take care of the rest.

Build Your Website

You will need to create a website for your online business at a certain time. It will significantly enhance your business image a lot. Moreover, building your website means you will have more freedom and full control since you don’t have to deal with a third party and their regulations.

Good news! It is no longer that difficult to create your website. You don’t need to be a coding expert to do so. Follow the following steps and you can have your website established in no time.

Choose a Domain Name

It is the part after the “www.” and before the extension (“.com” or “.net” for example) that people type in their browser to go to your website.

To own a domain (domain name + extension), you have to register it with a domain registrar. The 3 most popular registrars are:

• GoDaddy
• Domain.com
• Namecheap

You can check the availability of a domain directly on their websites. They have a search tool that you can use for free.

A little reminder: you cannot register a domain that has already been registered by another person. However, getting it is possible. Some registrars provide a service that helps you contact the owner to buy the domain. Of course, you will need to pay additional fees for such a service.

The domain prices vary according to their availability and extensions. Some are being discounted, lower than $1 per year. For some extensions such as “.health” and “.wedding”, the prices are up to $40 per year. For some domains that have already been owned, you may have to pay up to a thousand dollars to make it yours.

Choose a Web Host

Every online website needs a host. A hosting provider will provide you with space on a server. All the data and files of your website will be stored on the server for public view at all times (unless there is a crash).

The allocation of space on the server depends on the type of hosting. Here are some of the most common ones:

Shared hosting: your website will share the same server with others. That’s why it is cheap. However, the limitations are clear. The loading speed is low. Other websites on the server may bring risks to yours. You can barely make any customizations.

If you are running a small online business (blogging for example) and want it to be of the utmost economical, shared hosting can be an option. However, the more traffic grows, the much worse your website will perform with shared hosting.

Dedicated hosting: you will rent out the entire server. The loading speed is fast and steady (even with high traffic). You will be able to customize the server and install certain software that your website needs. Security is also guaranteed since you are the only one on the server.

If you are running a large business or expect a high volume of traffic coming to your online store, dedicated hosting is the right choice. However, the cost of maintenance is rather high.

Virtual private server (VPS) hosting: you will share the same server with others. But your websites are isolated from one another. You will also have access to configure the server (like dedicated hosting). It is much better than shared hosting and nearly as good as dedicated hosting.

If you are a medium-sized online business, VPS hosting is a great way to start. It provides you with great flexibility but does not cost you as much as dedicated hosting.

Why shouldn’t you use free hosting?

The main reasons are:

• Limited bandwidth
• Annoying advertising
• The risk of malware (viruses, ransomware, and spyware)

What are the best hosting companies in the UK?

To find out which hosting provider is the best fit for your UK online business, you should do research on Google before making the decision. With that being said, here are some recommendations:

• Hostinger
• SiteGround
• HostGator
• BlueHost
• A2 Hosting
• Heart Internet

Some domain registrars also provide hosting services, but the quality may be not as good as other hosting providers. Each host offers you various kinds of business plans and packages. You are recommended to directly visit their websites to consider the cost and the offered services.

Also a note: It would be convenient for you to find a hosting provider that can provide SSL certificates. SSL is a protocol that ensures privacy, authentication, and data integrity in Internet communications.

Operating System

When buying a server from a hosting provider, you will get to choose the operating system. In simple words, it is the most basic software on which everything runs.

The 2 most common operating systems are Linux and Windows. People normally go for Windows due to certain reasons: to run applications built on .NET language and framework.

If you do not have any specific reason to consider Windows, then Linux is all good. It is a good choice for common languages like PHP or Python.

Choose a Content Management System (CMS)

CMS allows you to add pages, and create and manage content professionally without coding knowledge. The top popular CMS are:

• WordPress
• Joomla
• Wix
• Squarespace
• Shopify
• GoDaddy Website Builder
• Drupal
• Blogger

Statistically, WordPress accounts for more than 50% of the CMS market share and more than 30% of total websites are built with WordPress. Just go with WordPress if you are still wondering which CMS to use.

One big plus is that WordPress is widely supported by most hosting providers. It can normally be easily installed with just one click in the cPanel.

Design Your Website

You’ve got your domain, got your hosting service, got your CMS installed. You’ve got everything needed to build your website. To start the building process, pick a wanted theme supported by the CMS (WordPress in this case). There are some default themes that you can choose from, or you can go and buy other themes to match your business image.

The advice is to stay away from random free themes out there. They may contain major risks. Look for a trustworthy theme provider that can offer good support and updates.

Here is a very good guideline on how to select WordPress themes that you can go over.

Then, go to the CMS dashboard, browse your theme, and customize it according to your preferences. With WordPress, you can easily create new pages, upload images, and fill in the content needed for each page.

You can go on Google and search for instructions if you are stuck somewhere in the process. There are tons of WordPress instructions out there.

Add a Payment Gateway

To start your online business in the UK, your website needs a way to accept money from customers’ debit or credit cards. This means you need a merchant account.

A merchant account will hold the money from all payments before depositing it into your business account. You can apply for such an account from a bank.

But that’s not the only way. You can also get a merchant service from a third-party provider. Some big names for example are WorldPay, Paypal, and Stripe. They will help you process your customers’ payments through a merchant account and later send the money to your business account.

Once you register for merchant services, you will need to set up a payment gateway on your website. The gateway’s purpose is to collect the payment details and pass them to the payment processor. The payment service provider will instruct you on this.

Manage Your Website

Having your website established and a payment gateway set up is enough to start your online business in the UK. Here are some notes to oversee the performance of your commerce sites:

• Install Google Tag Manager to later set up your Google Analytics,
• Set up Google Analytics with Tag Manager to track your website traffic and visitor behaviors, and

Add your website to Google Search Console, using your Tag Manager account for verification.

These Google Tools are essential for your website marketing strategies. They allow you to see how well your website is performing. If you have trouble installing them, the advice is to hire a marketing expert to do it for you.

Additionally, securing your website is extremely important. There is a possibility that your company will experience data breaches and hacks due to a lack of security. Distributed Denial of Service (DDoS) attack that has been arising alongside the evolution of online business may even shut down your website.

One more note: Make sure your website complies with local and global regulations regarding data protection and other aspects. Professional consultation is highly recommended.

Build Your Social Network

More and more people are joining social platforms. Social sites have millions of daily users and this is a great opportunity for your online business. You can pick some most popular social platforms like Facebook, Instagram, Pinterest, Twitter, and Youtube.

Next, create an account for your business, make a plan to fill in related content on your newsfeed, and insert a link in the posts to take customers to your website. There will also be a lot of social groups in which you can join to share useful information and present your products.

That’s one simple but effective way to further promote your business online and increase sales.

Basic Digital Marketing Strategies for Sales Increase

Digital marketing is the essential aspect that your UK online business should invest in, especially if it is a B2C business. There are many marketing strategies that you can use. In this blog, we suggest the 2 most common ones: Online advertising and SEO.

Online Advertisements

You can run advertisements on many platforms such as Google, Facebook, and LinkedIn. Each platform has a different cost basis. Let’s look at Google Ads since most people are now using this platform to find suitable merchants for their products.

When you put an ad on Google, they will charge you a fee every time a customer clicks on that ad. This is known as pay-per-click advertising.

The benefit of this is it can bring instant results. The higher you are willing to pay for one click, the higher the ads will be placed on the Google research results, and the more people will see and click on your ads.

The drawback is that it can burn your budget out very quickly. To run your ads effectively, you will need to obtain some knowledge of keyword research and marketing.

Search Engine Optimization (SEO)

This is for the long term. It takes longer for SEO to have its effect. The main focus is to put your pages in high-ranking positions where people can easily see them when searching certain keywords on a search engine (Google is the most popular).

There will be a lot of work when it comes to SEO. You need to carry out keyword research, build your website according to Google standards, and expand your online business across the Internet.

However, when your pages are ranked high on a search engine, the results will be very satisfying. The cost for SEO is rather low, much lower than running ads in the long term, but it can bring you huge sales profits.

Other Online Strategies

Email marketing: you will need to find a way to collect email addresses from potential customers (please remember to comply with General Data Protection Regulation). Then you create emails and send them to the customers to share useful related information as well as introduce your products.

The simple way is to create a section on your website where people can subscribe and receive your emails. Make sure the emails you write are on point and bring true value to your customers. Sending emails can be done automatically with the help of modern tools. Mailchimp is one of the best examples.

Affiliate marketing: you reach out to other websites (or other channels) and ask them to promote your products or services. You will need to pay them a commission every time a customer buys your products or services through their websites.

The ultimate advice for this section: Don’t hesitate to hire certain marketing experts to build up your brand and website! You can also use outsourcing marketing services. There are tons of services out there, your mission is to find the right ones.

Conclusion

Starting an online business in the UK is a lengthy process requiring entrepreneurs to have a thorough preparation: from business ideas to business registration and operations. The country offers you a business-friendly environment with many strategic advantages. Still, it is deemed to be quite challenging for newcomers to form a business within the jurisdiction.

BBCIncorp can assist you in forming your company with ease so that you can have more time to focus on other matters. We can also help you to build up a website with a payment gateway ready. With our services, you will get a company, a corporate business, and your commercial sites.