Why eCommerce Businesses Thrive in Hong Kong

Hong Kong has been a great place to set up an eCommerce business long before the demand for online shopping increased due to the pandemic.

eCommerce sales in Hong Kong are expected to grow at an annual growth rate of 8.3% between 2021 and 2024

The Hong Kong eCommerce market has been rapidly growing in the past five years and is expected to grow even more.

This growth is attributable to the favorable economic environment and advanced technological infrastructure, increasing consumer confidence in online transactions. 

This article outlines the many reasons Hong Kong is a great place for eCommerce businesses and why the business-friendly environment there helps such businesses thrive.

What Is an eCommerce Business?

eCommerce 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 online through your own website or by using online marketplaces or mobile commerce platforms. Mobile commerce platforms allow businesses to create virtual marketplace apps for their stores, making it even easier for customers to shop on the go.

Hong Kong shoppers can shop online and purchase books, clothes, groceries, and furniture, or even provide professional services such as legal and accountancy advice.

Through eCommerce, business owners no longer have to worry about the costs of maintaining a physical store. They can 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 Hong Kong eCommerce businesses, driven by a large and tech-savvy population of Hong Kong consumers. This translates to strong demand for various products sold online, including consumer electronics, fashion, and homeware.

Moreover, if you open up eCommerce stores in Hong Kong, there is significant potential for your business to grow rapidly 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, and computer, smartphone, and internet usage are consistently higher there than anywhere else.

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.

Another government study highlighted that nearly 38% of companies in Hong Kong had their websites. 

Most businesses and consumers are familiar with technology and use the Internet to complete their day-to-day activities. Hong Kong shoppers are more reliant on online shopping platforms, especially shopping for groceries, clothing, office equipment, school supplies, and home furniture.

This increased demand and reliance on using technology provides a great market for eCommerce businesses.

3. Favorable 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 eCommerce businesses.

While you can always open a local bank account, there are more convenient alternative fintech platforms in Hong Kong that can be used 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 to access eCommerce platforms due to the ease that comes with online banking.

This trend is expected to grow, and eCommerce 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 eCommerce purchases in Hong Kong will be digital wallet transactions within the next five years.

Hong Kong 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 eCommerce 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 eCommerce 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 eCommerce 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 into your eCommerce 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 eCommerce businesses incorporated within the country.

Having easy access to such investment opportunities is a major reason why eCommerce 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.

Final Words

Hong Kong has a great international reputation for carrying out business activities or even starting a business from scratch.

There is huge potential for online business models to thrive in Hong Kong, which is why you should take advantage of the benefits outlined in this article and start setting up your eCommerce business.

Looking to open an e-Commerce business in Hong Kong?

Register your company today with Air Corporate, and we'll get you approved in under 48 hours.