Across the Middle East, online businesses are booming with stores offering everything from shoes and clothing to mobile phones and home appliances. The growing success of online websites has made the entrepreneurial lifestyle more realistic than ever, but for businesses looking to launch in the Middle East it’s important to understand the unique business environment and the requirements that come with it.
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.
What to Sell (Whether Your Business is looking to Expand in the Region or Start from Scratch)
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 what products or services you want to offer to consumers, if you are not already an established business looking to expand in the region.
Ecommerce is a competitive world and unfortunately starting an online store without a plan will often lead to failure. There are three major questions you should ask before you start to dedicate your time and money to an ecommerce venture:
What sectors are seeing growth today?
What sectors are expected to grow in the coming years?
What sectors do I have an advantage in?
When it comes to the first two questions your best friend will always be research, research, research. Our annual report, State of Payments offers great insight into the top products for several countries and includes demographic data that can be used to predict trends and identify new opportunities.
The third question is much more personal. When it comes to identifying your advantages consider things like selling a product you create, selling directly to a niche community, or as mentioned earlier identifying new trends before competitors (think fidget spinners and matcha tea).
Ensuring you have a viable product from the very beginning is the key to being successful and taking the time to get it right will help lay a strong foundation for your ecommerce business (in the event that your business is not already established and has a foundation of its own).
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 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.
1. Select License Type
The first thing you will need to decide is the type of license you’ll require which in the case of ecommerce will be a trading license. With the license types selected you can contact DMCC directly and a representative will initiate the application process.
2. 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 those fees are due. Below we have outlined the standard costs to register a business in the DMCC.
- 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.
3. Prepare Documents
In addition to the costs + fees that need to be paid it is also important to be aware of the required documents to complete the registration process. For a DMCC the documents required include:
- Online pre-approval application form
- Copy of your passport
- Proof of residential address in 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.)
4. Choose Office Space
Finally, you will need to consider where you will have 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.
Banking + Payment Solutions
With your product selected and a business license secured you’re well on your way to getting your ecommerce 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, 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 + 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 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
Once you’ve made it this far your almost ready to start selling products; you just need to get your website built and live on the internet. If you have a strong technical background you can dive in and develop your own site, but odds are you’ll want to take advantage of pre-existing tools to create your online store. Consider sites like Shopify that offer a one stop shop to purchase your own domain and build a custom website based on their proven themes.
Once the core sections of your website are live, you’ll want to start thinking about the overall design of your online store. Things like how your products are organized and how the user navigates your website all affect sales so take the time to get them right.
With a website live your ecommerce is up for the world to see and ready to start generating sales. But don’t think your work is over, in fact, it’s likely just beginning. Running an ecommerce is all about optimizations and marketing and these jobs are never over. You’ll need to remain dedicated and work hard to stand out from your competitors if you want to truly succeed.
If you’re looking for some great additional resources to help you take your ecommerce to the next level, be sure to take a look at some of our past posts below:
Are you planning to launch an ecommerce 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 we missed. And if you’re looking for more great content be sure to follow @PAYFORT on Twitter for all the latest updates!