Note: This article covers business structure and tax details (sole proprietor vs. corporation, income thresholds, consumption tax treatment, and subsidy programs) that are specific to Japan. Requirements will differ in other countries.
When opening an online shop for the first time, do you have concerns like "Which service is best for launching?" or "I don't know how to actually get started"?
This article gives a detailed explanation of the basic knowledge needed to open an online shop, how to actually open one, and the funds required. We also introduce common failure cases and recommended services for opening an online shop, so please use this as a reference.
Basic Knowledge to Know Before Opening an Online Shop
First, let's cover the basics you should know before opening a shop, such as the advantages and disadvantages of an online shop.
Advantages of Opening an Online Shop
- Lower setup costs compared to a physical store
- Can operate 24 hours a day (inquiry response hours are set separately)
- Can sell nationwide
The biggest advantage of an online shop is that you can open and run it at a lower cost than a physical store. Opening a physical store often costs millions of yen, but an online shop can be opened and run for as little as tens of thousands to a few hundred thousand yen. Also, with an online shop, you can sell 24 hours a day, nationwide, from home.
Disadvantages of Opening an Online Shop
- Lots of competition
- Hard to acquire customers and repeat buyers
Because an online shop is low-cost and easy to start, there's a lot of competition, making it harder to drive traffic to your own site. Since you can't provide the kind of in-person service a physical store offers, it's also harder to turn customers into fans, which makes it harder to build repeat business.
When opening an online shop, you need to carefully plan your strategy for customer acquisition and repeat business.
Should You Start as a Sole Proprietor or a Corporation?
If you're considering opening an online shop as an individual, we recommend starting as a sole proprietor first. Starting as an individual has the following advantages:
- Lower tax rate up to a certain income level
- No initial costs for incorporating
- Simple procedures needed to start the business
- A longer grace period for consumption tax
Incorporate If Your Annual Profit Exceeds 8 Million Yen
Depending on your annual business income, taxes can end up higher as an individual. As a rule of thumb, if your business income exceeds, or is expected to exceed, 8 million yen, it may be better to start as a corporation.
A corporation is also recommended if you're starting out by hiring employees. Corporations can claim a broader range of expenses, and tend to find it easier to raise funds.
Consider whether to start as a sole proprietor or a corporation based on the scale of your online shop and your operating policy.
5 Steps to Opening an Online Shop
Here are the basic steps for opening an online shop.
- Create a business plan
- Decide how and where to source your products
- Confirm what you can sell and what filings are required
- Decide on a platform
- Build your online shop
We'll explain each step in detail below.
Step 1: Create a Business Plan
First, create a business plan. The following three points are important factors that shape your shop's future, so decide on them carefully.
- Shop name
- Concept
- Products to sell
Since online shops face a lot of competition, to get customers to buy from you, you need to communicate to them "who this shop is for and what it sells" and "why they should buy from your shop rather than a competitor."
Because of this, you need to clearly decide on your shop's concept and the products you'll sell before opening. Your shop name is an important part of getting customers to remember you. Once you've settled on your concept and products, take your time deciding on a shop name.
Step 2: Decide How and Where to Source Your Products
Decide whether you'll manufacture and sell original products, or source and sell ready-made products.
If you're selling original products, work out whether you'll handle manufacturing entirely in-house or outsource it to another company. If you're sourcing and selling ready-made products, clearly decide on your suppliers.
Step 3: Confirm What You Can Sell and What Filings Are Required
Some products can't be sold through an online shop, and some require a qualification or filing to sell.
| Products that cannot be sold | • Illegal drugs • Swords and weapons • Tobacco • Gift certificates, prepaid cards, and stamps • Information products related to financial products, etc. | | --- | --- | | Products requiring a qualification or permit to sell | • Processed foods • Alcoholic beverages • Cosmetics, etc. |
Beyond the items above, there are many other products that are prohibited from sale, or that require a qualification or permit to sell. Once you've decided what products to handle, check whether they fall under prohibited items, and whether any qualifications or permits are required.
Step 4: Decide on a Platform
Platforms you can use to launch an online shop broadly fall into two types: marketplace-type and ASP-type.
Marketplace-type platforms are where multiple shops open stores within a single EC site. Examples include Amazon, Yahoo! Shopping, and Rakuten Ichiba. Since the marketplace itself has strong customer-drawing power, a major appeal of marketplace-type platforms is that you can expect traffic even without putting much effort into customer acquisition yourself.
However, downsides include high listing/sales fees and a high likelihood of getting buried among competitors.
ASP-type platforms are systems equipped with the features needed for online sales. They let you open your own online shop easily and at low cost. Customizability and extensibility are also higher compared to marketplace-type platforms. However, you need to handle customer acquisition yourself.
Step 5: Build Your Online Shop
Once you've decided on a platform, start actually building your online shop.
We recommend putting particular effort into the design of your homepage so it conveys your brand's identity. Also keep ease of shopping in mind as you design the site.
What Funds Do You Need to Open an Online Shop?
Here, we explain the funds needed to open an online shop.
Breakdown of Opening Costs
The main cost items involved in opening an online shop are as follows:
- Online shop build cost
- Equipment costs, such as a PC
- Advertising costs
- Manufacturing/sourcing costs
- Costs for obtaining qualifications/permits
The funds needed to open an online shop depend on the products you handle and how elaborately you build the site, but budgeting at least around 300,000 yen is a good idea. If you outsource site building to an external company, it can exceed several million yen.
Tips for Keeping Opening Costs Down
The most effective way to keep opening costs down as much as possible is to launch your shop on an ASP-type platform.
Also, handle EC operation tasks like product photography and social media/ad management in-house as much as possible. It's also a good idea to raise funds using subsidy and grant programs that apply to opening an online shop, such as the Small Business Sustainability Subsidy or the Career-Up Subsidy.
If sourcing costs make up a large share of your expenses, review your suppliers.
What Are Common Failures When Opening an Online Shop?
Here we introduce common failure cases when opening an online shop.
Failing to Attract Customers
Even after opening an online shop, customers won't notice it unless you actively work on customer acquisition. Especially if you open your shop outside of a marketplace-type platform, you can't expect traffic or sales without customer acquisition efforts. After opening your online shop, actively work on things like SEO and social media to draw customers.
Misjudging Demand Due to Insufficient Market Research
Insufficient market research can lead to failure by selling products that don't match demand.
No matter how well your customer acquisition goes, if there's no actual demand for the product itself, or if your pricing or presentation is off, it won't lead to purchases.
It's important to repeat market research and testing before opening your online shop.
Cash Flow Trouble from Over-Sourcing Products
Sourcing too much inventory raises not just sourcing costs but also storage costs. This can make cash flow difficult. Understand the appropriate inventory level and be careful not to over-source.
Points to Watch When Running an Online Shop
Here, we explain points to watch when running an online shop.
Use SEO and Social Media to Attract Customers
An online shop generally can't expect customer traffic without customer acquisition efforts. Try using "SEO," which helps your site rank higher when people search on Google and elsewhere, and social media platforms like X and Instagram, to attract customers.
Design an Easy-to-Use Site
Visitors tend to leave an EC site that isn't designed to be easy to view and use. Design your site with not just visuals in mind, but also how easy it is to search for products and how simple the path to purchase is. To make your site easy to view, it's important to increase visibility by leaving enough whitespace.
Address Cart Abandonment
An estimated 70% of online shop visitors abandon their cart. Cart abandonment refers to visitors who add products to their cart but leave the site without completing a purchase.
Because of this, addressing cart abandonment alone can lead to a significant increase in sales.
There are various ways to address cart abandonment, such as improving the purchase process or reviewing shipping fees. For details, see "[2024] Cart Abandonment Countermeasures on Shopify: Causes, Solutions, and Recommended Shopify Apps."
What Should You Study to Open an Online Shop?
When opening an online shop, we recommend studying the following three areas:
- Marketing
- Social media and ad management
- Web design
Learning marketing helps you develop effective strategies for selling products. Building knowledge of social media and ad management will let you drive the customer acquisition needed to grow sales on your online shop. It's also a good idea to pick up web design knowledge so you can design a site with its own originality.
Recommended Online Shop Platforms for Beginners
Here, we introduce recommended online shop platforms for beginners.
1.Shopify
Image source: Shopify
Shopify is a service used in over 170 countries around the world. There's no setup fee, and monthly fees are relatively affordable, ranging from a few thousand to tens of thousands of yen.
It comes with all the features needed to run an EC site, letting you launch an online shop easily even without any knowledge of site building.
The Shopify App Store has over 16,000 dedicated apps, which you can install to freely extend your store's functionality. This lets you achieve the EC site you want to run, despite the low cost.
2.BASE
Image source: BASE
BASE has no registration fee, monthly fee, or annual fee at all, making it appealing as a low-risk way to open a shop. You can launch an online shop just by following simple on-screen instructions.
It's also appealing that you can expect traffic to your shop from BASE's shopping app, which has surpassed 7 million downloads (reference).
The blog article below explains BASE in detail. Please use it as a reference.
3.STORES
Image source: STORES
With STORES, you can easily design your site just by choosing from 48 design templates. High customizability is also appealing, letting you freely place videos, banners, and news.
With the free plan, there's no setup fee, and the payment processing fee charged once you start making sales is also low, making it easy for beginners to turn a profit.
The blog article below explains STORES in detail. Please use it as a reference.
Shopify Is Recommended If You're Opening an Online Shop
An online shop can be opened at lower cost than a physical store. If you follow the right process to launch your shop, you can avoid major mistakes.
If you don't want to fail, we recommend using "Shopify," which lets you run the EC site you want to, at low cost. There's no setup fee, and monthly fees are set at a low range of a few thousand to tens of thousands of yen. Thanks to high feature extensibility and store customizability, you can build an EC site close to your ideal.
Try using Shopify to open your online shop.
