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Many people looking to generate some extra income have turned to online sales in the hope of creating a source of passive income. This trend has intensified as a result of COVID-19 with the advent of increased reliance on distant-shopping, online video-telecommunications, and remote working. On the face of it, selling online sounds pretty simple: You find or create a product that you believe there would be sufficient demand for; you get a website built or even use existing e-commerce platforms; you put some marketing posts on your social media and hey presto! Cha-ching! Sales will be rolling in…

The truth is far more complicated than that.       

There are two common formats of selling online:

1. Online retailer: This is where normally you will hold a stock of the goods, take order from buying customers and ship the goods to them. 

2. Drop Shipping: This is where you do not handle the goods or keep goods in stock but only take orders online from buying customers. You then arrange for a manufacturer or retailer of the goods to deliver the goods directly to the consumer. 

The costs of joining these platforms can be high, but they also offer many benefits.

For a start, both the above forms of selling require a Business Licence in Gibraltar from the OFT. You may even require to have a physical premises to conduct such business, especially if you fall under the Online Retailer category. 

Next, you need to decide whether to build your own dedicated website or join an existing e-commerce platform. Online sales ‘malls’ like Amazon, Etsy or eBay are a convenient way to sell your products to an international audience. The costs of joining these platforms can be high, but they also offer many benefits. For example, Amazon provides its sellers with storage and shipping services so that business owners do not have to worry about complicated logistics.  If you’re still worried, you can get help from Strader Ferris International for shipping and other services.

It is important to understand that on all these sites, big and small, there is tough competition between the sellers and you will often have to pay for advertising within the platform as well. In addition, keep in mind that while joining sales sites is simple, it is difficult to stand out here and reach your unique audience. It is a real challenge to tell your story and catch the eye of the customer when you are just one of the same businesses that are obtained in the search results.

If you decide to have your own website, you will need to spend some money on either doing it yourself, or hire the services of a specialist web design company that will build the online store to your specifications. You will then need to find an online payments gateway to connect your store to credit card companies and the banks in order to be able to accept payments online. This in itself could be a pretty time-consuming task due to the comprehensive due-diligence and documentation that these financial service providers may ask you to provide.  

Finally, after you have successfully set up your online e-commerce website or drop-shipping, the real work begins – marketing! The success of any online business primarily depends on its marketing and advertising, to reach maximum exposure. While most small businesses do not have the budget required to spend on effective online marketing campaigns, they should start by taking advantage of the social channels available to them. 

The success of any online business primarily depends on its marketing.

A lot of small businesses want to start selling as quickly as possible, but do not take advantage of the tools that are already available to them to reach potential customers. Whether you sell physical products, market digital products or offer services, your online social profiles are great channels that you should utilise for the task. 

The right way to use social media to sell depends on the type of business and your goals: there are businesses for which small changes like posting a phone number for orders on their Facebook page and reminding followers that you are making deliveries will make all the difference. In other cases, posting photos of your products on Instagram stories is what will allow customers to choose what they are interested in and contact you. Facebook for example, offers a dedicated sales interface for small businesses that market physical products called Facebook Shops. The great advantage of setting up the store within your Instagram and Facebook profile is the high accessibility to the audience that is already following you and the advanced advertising options that Facebook offers.

Even if you managed to launch successful marketing and advertising operations, you would still need to take care of other important aspects of the business, such as customer support (handling customer enquiries and possibly refunds); taking care of logistics to ensure punctual product delivery; invoicing, and financials to ensure you are not operating at a loss. There could also be other compliance matters to deal with and various licences, registrations and approvals you will need to obtain from authorities and third parties. 

Having advised numerous people on setting up their online businesses, we can conclude by saying that while online sales could be a great revenue-generating channel, they are far from being a truly passive source of income, and require much work. Always seek professional advice before deciding to embark on such ventures to ensure it is done the right way. 

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Eran Shay Managing Director, Benefit Business Solutions Ltd. With over 20 years’ experience in the world of Finance, Eran specialises in helping companies grow in innovative ways. Eran has ample experience in the fields of Corporate Finance, Regulatory Advisory, Business & Strategic Planning, Valuations and Transaction Support and his focus on technology means he keeps in touch with innovative companies in a variety of sectors. Ayelet Mamo Shay Co-Founder & Business Development Director, Benefit Business Solutions Ltd. Ayelet specialises in online and offline marketing, sales, and PR. She is the author of the successful novel “Relocation Darling, Relocation!” and provides relocation consulting and personal coaching. A busy entrepreneur, Ayelet also serves as Chairwoman of the Gibraltar-Israel Chamber of Commerce.