Hong Kong has been great place to set up an eCommerce business long before the demand for online shopping increased due to the pandemic.
E-Commerce sales in Hong Kong are expected to grow at an annual growth rate of 8.3% between 2021 and 2024.
The Hong Kong e-Commerce market has been rapidly growing in the past five years and is expected to grow even more.
This growth is attributable to the favourable economic environment and advanced technological infrastructure, increasing consumer confidence in online transactions.
This article outlines the many reasons Hong Kong is a great palace for e-Commerce businesses and why the business-friendly environment in Hong Kong makes such businesses thrive.
What is an e-Commerce Business?
E-commerce businesses are those that operate completely online.
The business model operates by trading goods online through the internet.
There is no physical store that customers can visit, so there is a huge focus on digital marketing to gain an edge over your competitors.
You can sell almost anything through an e-Commerce business, such as books, clothes, groceries, furniture or even provide professional services such as legal and accountancy advice.
Through e-Commerce, business owners no longer have to worry about the costs of maintaining a physical store and simply focus on managing orders and shipping the products to the customer.
1. Leading eCommerce Market & Business Growth Potential
Hong Kong has a thriving online market where the market volume for eCommerce businesses stands at nearly US 11 million by 2025.
This highlights the level of potential growth in eCommerce businesses in Hong Kong. Compared to other countries, Hong Kong is one of the best markets to run an eCommerce business.
Moreover, if you open up an e-Commerce business in Hong Kong, there is significant potential for your business to rapidly grow as you are not just limited to trading in Hong Kong.
You can easily carry out your business activities in Mainland China and beyond.
This is a huge opportunity to grow your business as China currently represents almost X% of the entire global eCommerce market.
2. Technology Driven / Advanced Technology Infrastructure
Hong Kong is one of the world’s leading digital cities where computers, smartphones, and internet usage are consistently higher than anywhere else in the world.
Hong Kong has been facing a rapid increase in internet usage as nearly 5.9 million people aged ten and above had smartphones in 2019.
Alongside personal use of technology, businesses are also heavily dependent on technology.
nother government study highlighted that nearly 38% of companies in Hong Kong had their websites.
As most businesses and consumers are familiar with technology and use the internet to complete their day to day activities, they are more reliant on doing things online, especially shopping.
This can be by ordering groceries, clothing, office equipment, school supplies and home furniture.
This increased demand and reliance on using technology provides a great market for e-Commerce businesses.
3. Favourable Tax System
If you are running an offshore eCommerce business, Hong Kong is the best option for you as you can relieve a huge financial burden in terms of taxes.
Being a highly popular low-tax jurisdiction, Hong Kong has been interesting for many entrepreneurs looking to set up an eCommerce company.
Incorporating your eCommerce as a company in Hong Kong will allow you to benefit from the following tax requirements:
- Corporate income tax of only 8.25% for the first HKD 2 million
- No capital gains tax
- No tax on dividends
- No sales tax or value-added tax
- No tax on any profits derived from outside Hong Kong
According to the international tax standard set by the Organisation for Economic Co-operation and Development, Hong Kong is a ‘’white list’ country.
All white list countries have implemented the internationally agreed tax standard, which ensures transparency and security when running your eCommerce business.
4. Innovative Digital Banking
Hong Kong is one of the world’s financial hubs, has more than 70 of the world’s leading international banks present in the country.
Moreover, Hong Kong banks can easily approve applications relating to e-Commerce businesses.
While you can always open a local bank account, there are more convenient alternative fintech platforms in Hong Kong which you can use as a business bank account.
Consumers are also increasingly opting for more innovative digital banking means when shopping online such as paying through digital wallets and mobile banking applications.
Merchant Solutions highlights that more and more consumers prefer to shop on their mobile phones due to the ease that comes with online banking.
This trend is expected to grow, and e-Commerce businesses that take advantage of this and offer digital wallets that their customers use will gain popularity and continue to grow.
This is a huge benefit as it is expected that nearly one-third of all e-Commerce purchases in Hong Kong will be digital wallet transactions within the next five years.
Hong Kong is a country that is already taking the lead with digital banking and offering innovative alternative banking solutions which increase the demand and preference for online transactions and purchasing from e-Commerce businesses.
5. Strong Logistic Infrastructure
Hong Kong has a strong logistic infrastructure set up to meet the increasing demand for online transactions.
The surge in e-Commerce businesses can only be successful if logistics support such businesses.
Hong Kong can meet such demands as it currently ranks high in the World Bank’s global ranking of logistics capabilities and quality.
Moreover, Hong Kong has a well-developed transportation system and infrastructure, ensuring that shipments can be easily made when orders are made from an e-Commerce business.
These seamless supply chains have allowed Hong Kong to develop a great reputation within the eCommerce industry.
6. Easy Company Formation
The process of incorporating a company for your e-Commerce business in Hong Kong is extremely simple, easy and affordable.
All you need to do is gather the necessary documents and make an online application.
As long as you complete your application correctly, you should be able to incorporate your company in no time!
7. Easy Investment Opportunities
Due to Hong Kong’s strong business reputation due to its transparent regulations and tax system, investors are more confident to invest in e-Commerce businesses incorporated within the country.
Having easy access to such investment opportunities is a major reason why e-Commerce businesses thrive in Hong Kong.
Funding your business, especially in its early stages, is one of the hardest struggles for businesses.
Hong Kong provides a great business-friendly environment that gives investors the confidence that they will get a return on their investment.