With a population of 5.7 million, Singapore has an ecosystem of 4,000 startups and is characterized as an emerging ecommerce market (EEM). It occupies the first position in the economic freedom rating of 39 countries in the Asian-Pacific region. Entrepreneurs should take into account the following benefits and shortcomings of running a business in this country:
The specifics of launching a startup in Singapore
In this country, entrepreneurs can choose from four types of business structures:
- Sole trader. You’re the only person responsible for your business. You owe it, pay taxes, and are in charge of all the legal aspects.
- Company. It’s a commercial business entity that has shareholders. The latter don’t bear responsibility for the legal aspects of the company’s existence.
- Partnership. You run a business together with one or several other people. All of you share responsibility for the company.
- Trust. A third party entrusts their assets to you so that you preserve them and strive to make a profit on them.
Regardless of its structure, your startup can belong to one of the three business types:
- Independent contractor
- Online business
Most businesses in this country have the suffix Private Limited, Pte Ltd, or Ltd to their name, which means they operate as private limited companies.
The government body that registers new companies in Singapore is called the Accounting and Corporate Registration Authority (ACRA). It will provide you with an automatically generated unique entity number that will serve as your startup’s individual identificator. Each time you need to interact with government officials, you’ll let them know this number.
One week after your startup’s registration, you’ll receive a congratulatory letter from ACRA. Plus, many corporate service providers will be sending marketing emails to you, encouraging you to sign up for their services. Make sure to double-check whether these messages were indeed sent from the email addresses of governmental agencies and beware of scammers.
When opening a bank account, you’ll need to use your startup’s name, not yours. However, if you’re the sole proprietor of your business, it’s possible to use your personal bank account for financial transactions. Recently, the two most popular banking institutions among entrepreneurs in Singapore were the Maybank FlexiBiz Account for the lack of a monthly maintenance fee and the OCBC Business Growth Account for the lack of minimum deposit or fall below fees.
Average costs of launching a startup
The average costs of building a website in Singapore are rather high:
To cut down expenses, it would be wise to outsource remote professionals from abroad.
There are three options of setting up an office:
- Entrepreneurs who’re planning to rent a brick-and-mortar office are typically required to pay 2 to 3 months’ worth of rent and a one-month deposit upfront.
- Those who prefer to work from their bedrooms need to apply for the Home Office Permit — in this case, you’ll be allowed to hire no more than two non-resident staff members.
- Rent a virtual office with a physical address.
It’s essential to have a physical address for your startup because organizations will be sending letters to you.
The Employment Act protects workmen who earn S$4,500 or less as well as professionals in non-executive or managerial positions who earn S$2,600 or less.
- They can’t work more than 44 hours in a week, or more than 8 hours a day, or over 6 hours without a break.
- Employers should give them at least 14 days of sick leave.
- Staff members must have at least 7 days of annual leave in their first 12 months of service and at least 14 days in subsequent years.
Taxes in Singapore
All your Singapore citizens and PR employees should be registered with the Central Provident Fund (CPF) Board and pay CPF contributions. You’ll have to apply for a CPF number and submission account if you have one or more employees on a payroll and/or pay salary to yourself.
As your annual taxable turnover exceeds S$1 million, it’s mandatory to register with the goods and services tax. Otherwise, you risk getting a fine of up to S$10 000.
At the initial stage of your startup development, you won’t have to file a tax return as long as
- There is no chargeable income for the year;
- Your annual revenue doesn’t exceed S$5 million.
In Singapore, the corporate tax must be e-filed in December. Tax-resident businesses pay a flat rate of 17%.
Singapore ecommerce statistics and insights
Even though Singapore is a small island nation, it’s one of the largest e-commerce markets in Southeast Asia.
- Around 3.3 million individuals buy goods and services on the Internet.
- Every year, an average consumer spends $1,456 online.
- The worth of the local B2C ecommerce market has reached $4.9 billion.
- By 2025, the volume of the local ecommerce market is projected to reach $7 billion.
Singapore residents tend to buy consumer electronics, fashion and beauty products, toys, stuff for DIY projects and hobbies, and personal care items the most frequently. They make the most purchases during holiday periods and major online sales.
Credit cards remain the most used payment option. But the situation might change soon because real-time bank payment services and e-wallets might largely replace cards. The national real-time e-payments scheme PayNow might become one of the most popular payment options for ecommerce projects.
Around ⅓ of the total Singapore ecommerce market is cross-border sales. ¾ of Singapore’s online shoppers buy products from foreign vendors. China accounts for 43% of cross-border ecommerce sales, the US for 20%, and South Korea for 8%.
If you hesitate about whether it makes sense to launch a new ecommerce business in Singapore, remember that the local online commerce only accounts for 5.6% of overall retail spending. In the UK, this indicator is as high as 21.8%, and in the US, it’s 11%. Singapore residents still prefer to shop offline because the population density is high, the transport infrastructure is good, and it’s easy for people to visit physical retail stores. This means, there is plenty of room for your ecommerce project on the market.
Top 5 ecommerce platforms in Singapore
Here are the most popular online shopping platforms in this country:
Before you launch your own ecommerce startup in Singapore, you might want to explore these five marketplaces to check their product ranges and detect the best practices that you could borrow.
Shopee was launched in 2012 with the aim of revolutionizing online shopping in a decade. Its founders wanted it to become the number one e-commerce platform in Southeast Asia. They successfully achieved this goal thanks to bold experiments with new strategies and the speed of embracing new technologies. Today, Shopee is also available in Vietnam, Indonesia, Thailand, the Philippines, and Malaysia. Its audience exceeds 300 million users. Customers opt for this platform because it delivers purchases for free and offers generous discounts regularly.
Lazada enables consumers to buy products from major brands (such as Apple or Sony) at a reasonable price. It started as a small business that sold electronics but since 2016, it doesn’t limit itself to any particular category of goods. Its parent company is Alibaba Group that hires top marketing experts for its projects and can afford to invest huge sums in their development.
Qoo10 was founded in 2010. It’s a versatile marketplace that sells various types of goods at affordable prices. In total, there are over 2 million items on sale, including beauty products, home appliances, clothes, and electronics.
Qoo10 has established official partnerships with Nike, Adidas, and a few other global brands. Besides, this marketplace offers services such as phone and broadband plans, payment channels, and door-to-door grocery delivery.
The primary competitive edge of this platform is the five-star customer experience. Clients love Qoo10 for intuitive navigation, easy payment options, and client-centric design. Members who have signed up for the special program of this marketplace can benefit from exclusive discounts.
Amazon Singapore was established in 2019. It became the 16th global marketplace of this brand. To test the waters, Amazon began to offer its fast delivery service to Singapore residents in 2017 through the Prime Now app. When the marketplace opened its virtual doors, it had only around 500 vendors. The brand wasn’t discouraged by the country’s small size and population because it regarded Singapore as a launchpad into the region with hundreds of millions of Internet users.
EZbuy has been around since 2010. Its user base exceeds 100 million individuals across the Asia-Pacific region where it belongs to the top ten largest online retailers. It is focused on affordable products that are imported from the US, Taiwan, and Korea.
Most of the items that are sold here belong to four categories: home, family, beauty, and clothing. Apart from new products, Singapore residents also buy second-hand goods here. The price tags of used items by Prada, Louis Vuitton, Nike, and other A-list brands might be 70% lower than of their brand-new counterparts.
Ecommerce trends in Singapore
The three key ecommerce trends in this country are livestreaming, invisible payments, and visual/voice search.
Livestreaming means that consumers watch live video broadcasts on the Internet to assess the quality of products and services before the purchase. This is a meaningful competitive edge of Lazada and Shopee:
- Around 4,500 local vendors signed up on Lazada’s LazLive in April 2020 alone to make the most of this service — and the total gross merchandise volume generated thanks to this technology increased by 450% month-on-month.
- Between February to June 2020, the total hours streamed on ShopeeLive in Singapore and Malaysia have nearly doubled.
Compared to TV shopping of the previous decades, livestreaming looks more raw and real. This is exactly what consumers appreciate. They perceive brands as more honest and their products as more real. Besides, it’s a great chance for businesses to interact with their audience and get to know their customers’ demands better.
Payments are called invisible because customers don’t need to type in their credit card details and confirm the purchases. They simply add items to their carts and the financial transaction will be completed automatically. This mobile technology has great potential. People might want to use it only with these services that they resort to frequently, such as ride-sharing apps.
In 2020, around 23 million individuals relied on voice assistants to order goods online. Google Assistant, Alexa, and Walmart Voice Order are among the most popular solutions that can help users with online shopping. Ecommerce projects in Singapore that integrate this technology into their workflows should be able to remarkably differentiate themselves from the rest.
Venture capital in Singapore
In total, there are over 600 venture capital funds in this country. Here are the names and the brief characteristics of the most well-known ones that might be eager to support an ecommerce startup.
It’s one of the largest independent venture capital firms in Southeast Asia:
- The value of its combined portfolio goes over US$12.5 billion.
- It has US$600 million in assets under management.
- It has made over 35 investments.
Jungle Ventures are ready to deal with companies from various industries but take only a handful of startups on board at a time. They collaborate with founders directly and believe that the biggest value of any business is an independent thinker with a visionary idea. This VC provides aspiring companies with cash, guidance, and long-term, scalable solutions that enable them to grow.
The VC company perceives innovation and disruptive change as its main values. It wants the entrepreneurs whom it supports to be flexible and promptly adapt to the quickly evolving industry landscape. Innosight appreciates leaders who think proactively and not reactively. It can share precious recommendations on growth strategies for companies from various industries, including ecommerce.
This VC invests to improve mankind. It supports startups, ideas, and leaders who can trigger a social change to genuinely make the world a better place.
When sifting through businesses, Dream Labs pays paramount attention to their teams. Companies from the energy, healthcare, ecommerce, cleantech, and fintech industries are the most likely to get cash. But if you prove that your ecommerce initiative can have a positive impact on society, this VC might consider you too.
The firm relies on a US$50 million fund. To get a part of it, you should come up with a scalable business idea that will enable you to either disrupt the already existing marketing categories or create new ones.
Angel investing networks in Singapore
Unlike funds, angel investors act as private individuals — but they can join networks. They have accumulated considerable wealth and are ready to support seed-stage startups. They might give money to a company that hasn’t yet proved its viability simply because they like its idea. There are over 100 angel investors in the country. Typically, they provide startups with sums within the range of S$30,000 to S$500,000.
Business Angel Network South East Asia (BANSEA)
The oldest angel investment network in Asia was launched in 2001. It helps early-stage businesses connect with people who might be eager to support them financially. To boost your odds of getting funding, you need to have an outstanding idea and pitch it in a highly compelling manner. BANSEA frequently organizes workshops, conferences, and other types of events.
Business Angel Scheme (BAS)
This one is supervised by Spring Seeds that invests in promising startups in partnership with angel groups. Singapore-based enterprises can benefit from an equity investment scheme. The equity share depends on the amount of the investment. The maximum sum that a startup can get is S$1.5 million.
Singapore Angel Network (SGAN)
It’s the investment arm of the Thakral Group of Companies. Its target audience is startups at the later stage of development. Businesses from any industry can apply for support.
Top startup incubators and accelerators in Singapore
If you need mentorship and assistance with getting the necessary industry contacts, consider joining an incubator or accelerator. Compared to accelerators, incubators let startups stay with them longer and practice a more laid-back approach. Apart from commercial initiatives, fledgling businesses also apply for government schemes — such as Startup SG Founder grants or the ACE Startups grant.
This accelerator is industry-agnostic and offers monthly memberships. It helps entrepreneurs who already have business ideas to meet co-founders. Besides, you can use it to look for investors and mentors.
This incubator stands out from the rest because it supports female founders. To join it, you don’t need to have a business idea. It’s perfect for ladies who want to launch an ecommerce startup but haven’t discovered a niche for it yet. CRIB offers annual membership to women who’d love to find new professional development opportunities and business contacts.
This one features annual membership for early and mature tech startups with a team. Consider it if your ecommerce project will involve disruptive technologies. If you have an idea, Founders Network will put you in touch with investors as well as give you access to archives and forums. You’ll be required to only pay for the services that you use.
Founder Institute Singapore
The sector-agnostic institute welcomes entrepreneurs who are seeking cofounders to a 15-week program. Applications are accepted from small teams, solo founders, or duos. You need to have a clear business idea and your startup should be at the pre-seed stage. The participants can benefit from seed funding, consultations with mentors, and lifetime support.
This one is for talents who lack both an idea and a cofounder. It offers a 6-month program for tech businesses but it can also consider companies from other industries. In addition to all the conventional benefits of an incubator, Entrepreneur First will give you a study allowance to cover your living expenses.
4 Singapore-specific niches for ecommerce businesses
You might be able to succeed by launching an ecommerce startup in any niche where you have expertise. But if you lack a clear idea, consider these four niches that should have great potential in Singapore.
Singapore is the leading biotechnology hub in the region and on a global scale. The number of professionals who work in the biopharmaceutical sector has more than doubled since the early 2000s and exceeds 6,000 people. 4 of the top 10 drugs by global revenue are manufactured here. The government has set the goal of making Singapore the world’s first Smart Nation and is heavily investing in science and technology. If you create a marketplace for biotech products, the demand for it should be high.
Singapore is the seventeenth-largest trading partner of the United States. It’s one of the major trading partners for South Korea, Indonesia, China, and Malaysia. Your ecommerce business can facilitate foreign trade for Singapore-based companies.
Travel and tourism
Almost 14% of all international tourist receipts in South Asia account for Singapore. In 2019, over 19 million foreign tourists visited this country. Consider developing a platform that will make it easier for travelers to book hotels and transportation, discover the hidden gems of the country, and get discounts.
By 2035, around ⅓ of the country’s population will be aged 65 or older. The fertility rate in Singapore is one of the lowest in the world: 1.15 children per woman. Ecommerce startups can come up with solutions that improve the lives of elderly people or sell solutions by various manufacturers.
Singapore is an emerging ecommerce market, so now it seems to be the perfect time to launch your own startup here.
You can be the sole proprietor of your business or you may register a company or a partnership. The startup registration process is quick and the tax rates are affordable.
If needed, you can rely on an extensive network of venture capitalists, angel investors, startup incubators, and accelerators in the country. If you don’t know which niche your business should belong to, join an incubator for founders who lack ideas. Alternatively, consider such promising sectors as travel and tourism, elderly care, biotechnologies, or import and export.
To get a competitive benefit, it might be wise to integrate invisible payments, visual and voice search, and livestreaming into your ecommerce project. Even though Singapore is small, it can become an excellent launchpad from where you’ll expand all over the Asian-Pacific region.