With web communities, group-buying websites and other e-commerce portals flourishing in the UAE, the idea of setting up an online business in the country is becoming increasingly attractive. Here are a few factors and steps to consider when starting an online business in the UAE.
As with any company, market research, creating astrong business plan and securing funding are some of the main steps in setting up an online business. Once you have taken care of the planning stage, you have to start taking into account the set up requirements, procedures and costs. Online businesses are governed by most of the same laws as traditional businesses, but you should consider the following factors before launching:
To form a web-based company, you will need to secure a business license from the Department of Economic Development (DED). If you are looking to setup within a free zone, the license will have to be acquired from the relevant free zone authority.
The type of license issued will depend on the nature of your online business. Requirements for running an information website can differ from those of an online shopping portal. For example, if you are launching a shopping website targeted at UAE consumers, you will have to acquire a commercial trading license as you are essentially selling products in the market. If you decide to set up base in a free zone, you will require a local agent or distributor to sell products to the UAE market outside the free zone.
Depending on the nature of the business, you should also consider setting up a physical office. A popular international model for setting up an online business is having a virtual office. This concept, where you have a business address without a dedicated office space, is available within the UAE as well, but not all emirates permit it. For example, according to Dubai’s DED, a Dubai-based company must have physical office space to be considered legal. Other options, such as hot desks offered by free zones, can also be considered depending on the nature and size of the company. (Click here for more information)
To set up an online business, you naturally need to prepare a website. The following steps need to be taken when establishing your web presence:
- Registering a domain name
- You will need to choose and register a domain name. This is the name or address you use for your website (often the company’s name). It will be useful to do some research on domain names that have already been taken before finalizing a company name. You wouldn't want to set your heart on a particular one, only to find out the domain name is already is in use.
- A number of companies in the UAE offer domain name registration services. In order to acquire a “.ae” domain name, you can register with telecommunications company Etisalat’s (United Arab Emirates Network Information Center) UAEnic.
- Finding a host for the website
- Just as in a physical shop, you’ll need space to store the content of your website or display your products. This space can be purchased from web hosting companies (also known as web hosts). Web hosts are considered landlords who rent server space to individuals and organisations to host their website. Some companies provide both domain name registration and web hosting services, as well as web design templates all under one roof.
- In the absence of a brick-and-mortar store, the website will be the face of your company. Just as you would spend on the design, layout, look and feel of your physical store, you have to ensure that your website is attractive, engaging and user-friendly. To this end, hiring a great designer or web designing company is vital.
- While you can find ready made website templates online, it’s best to hire a web designer who can create a unique design for your website and customize it to your business needs.
If you are an online shopping portal, there are a few additional factors to consider:
Online payment gateways
If you are selling products online (whether tangible or intangible) you need to set a secure payment gateway. Options include credit card payment, cash on delivery, and pre-paid card systems such as PayPal and CashU.
If you are importing products from outside the country and selling them online to the UAE market, the business has to be registered with the relevant emirate’s ports and customs authority, and receive an importer’s code. A customs duty (often 5%) is applicable to goods being imported.
Businesses established within a free zone are exempt from customs duties if they are selling their products/services within the free zone or outside the country. However, if they are selling to the UAE market (outside the free zone), the customs duty has to be paid and a local commercial agent has to be appointed.
Any business dealing with physical products needs to consider renting or purchasing storage space. Hence, if you need to store a large quantity of products, you should include warehouse costs in your calculation.
You should also take into account costs associated with the delivery of products. This will include purchasing delivery vehicles and other transport-related costs such as petrol, vehicle servicing and insurance.
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