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How to Establish a Successful eCommerce Business in the UK (as a US Entity)

December 6, 2024
How to Establish a Successful eCommerce Business in the UK (as a US Entity)

Whether it’s hiring services online or buying goods from across the globe, the internet has revolutionised the way we do business, opening up vast opportunities for US businesses in the global market.

With businesses no longer bound to a physical store, UK consumers can quickly and easily purchase goods from the United States. Online eCommerce platforms have also streamlined online business with features like integrated payment, shipping, and customer service.

But while establishing your own online store in the UK may seem easy, expanding your existing business from the US to the UK comes with its own set of challenges.

In this article, we’ll explore the topic of establishing a successful eCommerce business in the UK as a US entity. We’ll provide some tips on identifying a profitable business idea and touch on some key considerations for entering the UK market, including shipping and logistics, customs compliance, and finding the right eCommerce platform.

What is an eCommerce Business?

eCommerce (electronic commerce) refers to the buying and selling of goods or services over the internet, and can include a wide range of online transactions. eCommerce businesses sell anything from apparel to digital products like online courses and educational materials.

For example, “eCommerce” can be when UK consumers purchase products online from US companies. Or it can take place when consumers buy products from each other through online auctions like eBay. 

eCommerce has revolutionised the way businesses operate, as any business can easily reach a global customer base, which simply isn’t possible with brick and mortar stores.

Overview of the UK Online Marketplace

The UK has long been a leader in eCommerce. Online sales in the UK reached £129 billion in 2021, a 15% increase from the previous year. These eCommerce trends are projected to continue, with the UK expecting to have 50 million eCommerce users in 2024.

This growth in eCommerce has been driven by a tech-savvy population, widespread internet access, and the COVID-19 pandemic, which accelerated the shift towards online shopping. Some of the most popular product categories in the UK online retail include:

  • Clothing and footwear
  • Food
  • Beauty Products
  • Electronics (eg mobile devices)
  • Home and garden items

Starting an Online Store in the UK as a US Entity

Whether you want to enter the global apparel market or sell subscription boxes to UK consumers, starting an eCommerce business in the UK as a US entity takes considerable research, planning, and action. Here are the basic steps a US entity should take to establish an eCommerce business in the UK:

Explore eCommerce Business Models

Before launching your eCommerce business and starting to sell products to UK consumers, it’s crucial to select a business model that aligns with the needs and preferences of the UK market. The choice of online business model will determine your target audience, marketing strategies, and overall operations.

When exploring eCommerce business ideas, the three main business models to consider are:

Business-to-Consumer (B2C): The B2C model, the most common eCommerce model, is when eCommerce stores make direct sales to individual consumers. This approach allows US businesses to reach a wide range of UK consumers, but it also requires a strong focus on customer experience, marketing efforts, and logistics to compete with UK retailers established in electronic commerce.

An example of a B2C eCommerce business would be a US online clothing business that sells apparel to consumers in the UK.

Consumer-to-Consumer (C2C): Consumer-to-consumer is when consumers sell goods and services directly to other consumers, often through online marketplaces. C2C can be an attractive option for US businesses looking to tap into the growing UK peer-to-peer economy, but it could require significant effort to effectively market your online store and build trust with UK consumers who may already prefer local businesses and trusted online marketplaces.

Business-to-Business (B2B): In a B2B model, an eCommerce business sells goods and services to other businesses, such as wholesalers, retailers, or other commercial entities. The B2B market in the UK is well-developed, and this model can offer more stable and predictable revenue streams, but it may also require more specialised sales and marketing strategies.

Carefully considering the pros and cons of each business model, as well as the specific needs and preferences of your target customers, will help you choose the most suitable approach for your online store.

Research eCommerce Business Ideas

Market research is an essential step for generating business ideas or an eCommerce website. Conduct a comprehensive analysis of the competitive landscape, identifying gaps and emerging e-commerce trends in the UK. Use market research tools and customer data to understand consumer preferences, buying behaviours, and popular niche products that you could sell on your own eCommerce website.

When trying to develop a business idea, carefully consider factors such as demand, pricing, shipping costs, and potential regulatory requirements. This research will help you identify the most promising product or service that is likely to resonate with UK consumers, leading to a profitable eCommerce business idea.

Register your Business

When a US-based eCommerce business expands to the UK, it may need to register with the relevant government agencies. The requirements for registering a business differ depending on the nature of the business.

For example, US eCommerce businesses that also plan on establishing a physical presence in the UK may need to register with Companies House, the UK’s registrar of companies.

Additionally, you may need to register for a UK business license, depending on the nature of your operations. Familiarising yourself with the specific requirements for your business is crucial to ensuring smooth business operations in the UK and avoiding fines for non-compliance.

Comply with Legal Requirements

To operate an eCommerce business in the UK, US entities must consider the legal requirements set out by the relevant government agencies. 

Some of these legal requirements include:

Consider Taxation and VAT

One of the biggest challenges for US online stores entering the UK market is understanding and complying with the country’s tax system set out by the relevant government agencies. US businesses selling in the UK market must register for and pay UK value-added tax (VAT), which is a consumption tax levied on most goods and services.

The VAT registration threshold is currently £85,000, and US businesses must charge VAT on all applicable sales to UK customers. Additionally, US eCommerce businesses must become familiar with other tax obligations, such as corporate income tax and employment taxes, to ensure their business is fully compliant.

When US businesses sell products in the UK, they may also have to pay an import tax. 

H3: Establish Shipping and Logistics

The standard of shipping service is high in the UK, as UK customers have come to expect fast, affordable, and seamless delivery of online purchases. Any delays or complications can quickly erode customer trust and satisfaction.

This makes shipping and logistics one of the most significant eCommerce challenges. US eCommerce businesses expanding to the UK must ensure efficient and reliable shipping and logistics operations.

Navigating the complexities of international shipping, customs clearance, and last-mile delivery can sometimes be a significant challenge for US eCommerce businesses – so it’s worth doing sufficient research beforehand, and investing in professional assistance.

H2: Choosing the Best eCommerce Platform

Choosing the right eCommerce platform can significantly impact the success of your eCommerce store. 

For a US eCommerce business looking to expand to the UK, it’s essential to compare various eCommerce platforms and make a decision that will make eCommerce profitable.

Essential Features of eCommerce Platforms

The platform you select for your eCommerce store should offer features that allow you to:

  • Easily manage product catalogs
  • Process orders
  • Handle customer inquiries
  • Manage inventory
  • Access reporting and analytics capabilities

Through these features, US eCommerce stores can sell products online to UK audiences more efficiently, handle their internal operations, and monitor the success of their business online.

Mobile Optimisation

Businesses selling online should not underestimate the importance of mobile commerce. In 2023, roughly 56% of eCommerce retail sales in the UK were made through mobile devices.

To take advantage of mobile eCommerce trends, your eCommerce platform should offer a seamless, responsive user experience that makes selling products on smart devices easy. Building an eCommerce storefront that functions on mobile devices should let businesses optimise:

  • Product pages
  • Checkout processes
  • Navigation for mobile users

eCommerce platforms with built-in mobile-friendly design features can help ensure your UK customers have a positive shopping experience, regardless of the device they use.

Integrated Payment Gateways

To cater to the preferences of UK consumers who shop online, US eCommerce sellers should also choose a platform that integrates with a wide range of popular payment gateways, such as Stripe, Square, and PayPal, as well as local UK options like Klarna.

Shipping Options

Shipping is one of the biggest challenges of selling online in the UK. Therefore, the eCommerce platform you choose should allow for easy integration with shipping carriers and services, enabling you to offer a variety of delivery options to UK customers, from standard ground shipping to expedited delivery.

Start Making eCommerce Sales in the UK 

For US-based eCommerce businesses looking to enter the UK market, navigating the complexities of international trade and customs can be a daunting task. This is where the expertise of clearBorder can prove invaluable.

clearBorder’s unparalleled knowledge of UK import and export regulations can help your eCommerce business overcome the challenges of customs clearance and ensure your products reach UK customers on time. Our team of experts can provide comprehensive training and resources to your US business, helping you ship your products to UK customers with confidence.

With clearBorder’s expert customs compliance support, you can reduce the risk of delays, errors, or unexpected fees when importing your goods into the UK. With comprehensive shipping and customs support, you can increase the efficiency of your UK operations and ensure your UK customers have a positive online shopping experience and reliable delivery.

Contact clearBorder for expert guidance in expanding your US eCommerce business to the UK.