The growing success of online websites has made the entrepreneurial lifestyle more realistic than ever, but for businesses looking to launch in this exciting region, it's important to understand the unique challenges and requirements that come with such a venture.
Whether you are looking to supplement your monthly income, start-up a full-time business, expand your current business into the region or just share your products with the world, this week we'll be sharing what it takes to start an ecommerce business in the Middle East.
Will Your Product Sell?
When starting a business in the region you'll need to consider a wide range of factors but first and foremost you'll need to decide whether the products or services you offer will be purchased by consumers here.
If you haven't decided what you'll be selling yet, then now is the time to inform your decision with some key facts and data about shopping trends in the Middle East.
Ecommerce is a competitive world and unfortunately starting an online store without a plan will most probably lead to failure. There are three major questions you should ask before you finalise your product or service range:
- Which sectors are currently seeing strong sales performance?
- Which sectors are expected to grow in the coming years?
- Which sectors does your brand have a competitive advantage in?
When it comes to the first two questions, your best friend will always be research, research, research. Our annual report offers great insights into the top products for several countries and includes demographic data that can be used to predict trends and identify new opportunities, so we highly recommend making use of this resource as well as other research methods.
When it comes to identifying your advantages, however, consider your main value propositions and how well you are protected against competitors taking over your space.
For instance, will a local producer be able to create and sell similar products to yours for a cheaper price? If so, you might have to pivot in your product offering or adapt your brand so that customers will still prefer to shop from you rather than your competitors.
Once you've decided on what product you will be offering, the next item to consider is setting up your trade license so that you can legally operate and conduct business in the region.
When it comes to trade licenses there are a wide range of options available and the exact license that is right for you will depend on your capital or allocated budget, where you would like to be located, whether you are willing to give up equity in your business and much more.
For the purposes of this post we'll be providing an example below for one of the region's most popular destinations; Dubai in the United Arab Emirates. In particular, we will be looking at the DMCC free zone in Jumeriah Lakes Towers.
Select License Type
Before processing a business license, you will need to decide which type of license you'll require. And in the case of ecommerce businesses, this will need to be a trading license. You can contact DMCC directly and a representative will initiate the application process for you.
Understand Registration Cost & Fees
Starting a business within Dubai can be costly so it is important to be aware of what needs to be paid and when, during the application process. Below are some standard costs for registering a business in the DMCC area.
- Initial Application - AED 1,015 (one-time charge)
- Registration – AED 9,020 (one-time charge)
- License - AED 20,285 (annual fee)
- Establishment Card - AED 1,800 (annual fee)
- Memorandum of Association (MoA) - AED 2,020 (one-time)
- Residence Visa - AED 3,330 (Payable every 3 years)
- Visa Deposit - AED 3,000 (refundable)
The above costs total just over AED 40K but it is important to note that this includes a 3-year residency permit that will allow you to operate and live within the UAE while running your ecommerce business.
In addition to the costs and fees that need to be paid, it is also important to be aware of the required documents for completing the registration process. For DMCC, the documents required include:
- Online pre-approval application form
- Copy of your passport
- Proof of residential address in your country of residence
- Summary of business plan for certain activities
- Details of an office address in DMCC free zone (Required after your company has been registered.)
Choose Office Space
Finally, you will need to consider where you will register your head office. For businesses operating in the UAE it is a requirement to have an office location within your free zone of choice. In the case of DMCC, this means an office in Jumeriah Lakes Towers
If you are not ready to invest in an office right away, DMCC offers a service called Flexi-Desk that can be used on a part-time basis while still giving your business a permanent physical address. This option is considerably cheaper than leasing an office and is a great option for entrepreneurs who are just starting out.
Alternatively, you can rent office space or even just a desk within a business centre or shared work space. These facilities, which are increasingly popular throughout the Middle East, provide individual professionals and start-up teams with some foundational facilities like meeting rooms, quiet space, high-speed internet, kitchen facilities and more.
Depending on what you need, you can modify your membership plan to best suit your needs. And with the flexibility and benefits that some centres offer, you may even choose to remain here far beyond your start-up phase.
Banking and Payment Solutions
With your product selected and a business license secured, you're well on your way to getting your ecommerce business up and running in the Middle East. The next area that needs to be considered is how you will collect money from your sales.
In this regard, the Middle East is quite similar to other developed regions in that you will need two accounts to start collecting payments; a commercial bank account as well as a merchant account.
Commercial Bank Account
A commercial bank account is very similar to your personal bank account but rather than being owned by an individual it's owned by your newly formed business. The requirements to open your account will vary slightly depending on where you choose to open it, but you can expect to be asked for the following documents:
- Company trade license
- Passport and local identification card
- Residency visa
A merchant account is a specific type of business bank account that enables a business to accept and process debit as well as credit card transactions. As ecommerce businesses operate almost exclusively on these types of transactions, setting up a merchant account is a critical step for getting your ecommerce strategy up and running.
In fact, depending on where you choose to open your account you may be able to secure an account specifically designed to handle online sales. As with a commercial bank account, you will be required to share the following documents when setting up your account:
- Company trade license
- Passport or local identification card
- Residency visa
An Ecommerce Website
Once you've made it this far, you're almost ready to start selling products. You just need to design and launch your virtual store online. If you have a strong technical background you might be able to dive in and develop your own site, but that odds are you'll want to take advantage of experts in this field who can help you develop a reliable and robust ecommerce platform for all your current and future needs.
Many professional web developers will be able to build you a site that works with a fully-hosted ecommerce platform like Shopify or Magento. These places offer a one-stop-shop for purchasing your own domain, designing your site, and providing fundamental ecommerce sales features.
A good ecommerce website will consider everything from how your branding is visualised across all your pages, how easy it is for users to navigate your products, and how each page contributes to a positive purchasing journey for your customers.
Having a live website that can start generating sales is a great achievement, but don't think that your work is over. In fact, it's likely just beginning.
Running a successful ecommerce business is all about optimizing your process and executing multi-channel marketing campaigns that draw in plenty of traffic.
Are you planning to launch an ecommerce business in the region? We'd love to hear from you! Share your story in the comments below and let us know if there's anything you'd like us to comment on. And if you're looking for more great content, be sure to follow us on Twitter via @amzpymntservsfor all the latest updates!