How to Start an Ecommerce Business in India: Step by Step

How to start an ecommerce business in India: margin maths, sourcing, GST and TCS, marketplaces vs your own site, COD, RTO, compliance and a launch checklist.

Published 8 September 2026 by Web Hippo in Industry Insights

Most guides on how to start an ecommerce business stop at "pick a niche, build a store, run ads". In India that leaves out the things that actually sink new sellers: cash-on-delivery orders that come back unopened, GST and TCS deductions on marketplace payouts, and ad costs that quietly eat the whole margin.

This guide is for founders launching a physical-product brand in India, whether on Amazon and Flipkart, on their own website, or both. It walks through product selection with a worked unit-economics table, sourcing, business registration and GST, payments and COD, logistics and RTO, the compliance basics, launch marketing and the metrics to watch. If you are still choosing between ecommerce, services, content or other online models, start with our guide on how to start an online business.

How to Start an Ecommerce Business in India: The 9 Steps

1. Pick a product where the unit economics work on paper before you spend on stock.
2. Source it from a manufacturer, wholesaler or private-label supplier, and test samples.
3. Register the business: structure, PAN, current account and GST.
4. Choose your channels: marketplaces, your own website, or both.
5. Set up payments, including a clear policy on cash on delivery (COD).
6. Set up shipping through a courier or aggregator, with a plan to control returns.
7. Meet the compliance basics: listing disclosures, grievance officer, packaging declarations.
8. Launch with a small, measurable marketing budget.
9. Track contribution margin per order, RTO rate and repeat purchase from day one.

Step 1: Choose a Product the Margin Maths Supports

A good ecommerce product in India is usually light (cheap to ship), hard to break, not sold by a dozen identical listings, and priced high enough to absorb shipping and ads. Categories where buyers trust a specialist brand, such as skincare for a specific concern, niche kitchen tools or regional food products with proper licences, tend to work better for new brands than generic electronics accessories.

The most useful thing you can do before ordering stock is build the per-order maths. Gross margin (price minus product cost) looks healthy for almost every product. What matters is the contribution margin: what is left from each delivered order after GST, shipping, payment fees, returns and the ad cost of getting that order.

Worked example: unit economics for one product

Say a Pune brand sells a 200 ml cold-pressed hair oil at ₹999, including GST. The table below follows one delivered order through an own-website sale and a marketplace sale. Every number here is illustrative: fees, courier rates and GST rates vary by category, weight, contract and HSN code, so replace each line with your own quotes.

The RTO line, worked out. RTO (return to origin) is an order the courier could not deliver, usually a COD order the buyer refused, which comes back to you. Assume 100 website orders: 60 prepaid with 3% RTO and 40 COD with 25% RTO. That is about 12 RTOs and 88 delivered orders.

Each RTO costs forward shipping (₹70), return shipping (₹70) and wasted packaging (₹30), so ₹170. Spread across the 88 delivered orders, that is about ₹23 each. The same logic is why the ad cost rises from ₹250 per order placed to ₹284 per order delivered.

Three things jump out. First, on the website ads are the single biggest cost, larger than the product itself, so a product with a thin margin before ads will not survive paid acquisition. Second, the marketplace looks slightly better per order here, but you do not own the customer, and the commission rises with the price. Third, if COD RTO climbs from 25% to 40%, website contribution falls from ₹164 to about ₹131, a fifth of the profit gone.

Put this into a simple spreadsheet as your ecommerce business plan. Beyond the unit economics, the plan needs your launch stock quantity, how many months of ad spend you can fund before repeat orders arrive, and a target for the RTO rate. Investors and lenders will ask for exactly these numbers.

Step 2: Source the Product

You have four realistic routes. Each trades control against upfront cash.

Our view on dropshipping in India: it works as a demand test, rarely as a business. Delivery times from overseas suppliers are long, COD is hard to offer, and the customer blames your brand for every late or damaged parcel. If a product tests well, move to holding your own stock.

Whichever route you choose, order samples, test them the way a customer would (drop the bottle, wash the fabric, leave the product in a hot parcel van for a day), and get the landed cost in writing, including freight to your warehouse.

Step 3: Ecommerce Business Registration in India

You can start as a sole proprietorship with your own PAN, which is the quickest option. An LLP or private limited company costs more to set up and maintain but separates your personal liability and makes raising money easier. Most first-time sellers start as a proprietorship and convert once the business proves itself. A CA can advise on the right structure for your situation.

Beyond the structure, the usual list is: PAN, a current account in the business name, GST registration, Udyam (MSME) registration if you want access to MSME schemes, a trademark application for your brand name, and any category licence your product needs, such as FSSAI for food or the relevant licence for cosmetics manufacturing.

Do ecommerce sellers need GST registration?

Normally, businesses need GST registration only once turnover crosses a threshold: ₹40 lakh for suppliers of goods in most states, and ₹20 lakh in a few, including Telangana. Ecommerce sellers hit two exceptions. The CGST Act makes registration compulsory, whatever the turnover, for anyone supplying through an operator that collects tax at source (a marketplace), and for anyone making inter-state supplies of goods, which includes shipping from your own website to buyers in other states.

Since 1 October 2023 there is a limited relief. Under Notification 34/2023-Central Tax, a seller of goods can sell through marketplaces without GST registration if turnover stays under the normal threshold, all sales are within one state, and the seller has taken an enrolment number on the GST portal using their PAN. In practice, a new brand that wants to ship across India needs a GSTIN from the start. Most marketplaces also ask for one during seller onboarding.

TCS: why marketplace payouts are slightly lower

Under Section 52 of the CGST Act, marketplaces that collect payment on your behalf must deduct TCS (tax collected at source) from your payout and deposit it with the government. Since 10 July 2024 the central part of this is 0.25% of net taxable value (Notification 15/2024-Central Tax), with a matching state share, so 0.5% in total. TCS is not an extra cost: it shows up as a credit you can use against your GST liability. It does affect cash flow, so reconcile it every month.

Step 4: Own Website, Marketplaces, or Both

We would usually start with both: a marketplace for early volume and reviews, and a simple website for brand search, repeat buyers and higher-margin bundles. If you are building the site, our guide to ecommerce website templates will help you pick a theme, and our web development team builds Shopify and custom stores for Indian brands.

Step 5: Payments and Cash on Delivery

For your own site you need a payment gateway that supports UPI, cards, net banking and wallets. Use an RBI-authorised payment aggregator, compare the fee per method (UPI and card rates differ), and check the settlement cycle, because a T+2 or T+3 payout affects how quickly you can reorder stock.

COD is still expected by many Indian buyers, particularly outside the metros, but it is where most RTO comes from. You do not have to choose between offering it everywhere and not at all:

Confirm COD orders by WhatsApp or an automated call before dispatch, and cancel unconfirmed ones.
Nudge to prepaid with a small prepaid discount or free shipping on prepaid orders.
Add a COD fee or a minimum order value for COD.
Block COD by pincode where your RTO history is bad, while keeping prepaid open.
Take a partial advance (for example ₹99 online, balance on delivery) for higher-value orders.

Step 6: Logistics and RTO Management

Early on, a shipping aggregator (a platform that lets you book several courier companies from one dashboard, such as Shiprocket or NimbusPost) is simpler than signing direct contracts with each courier. You get multiple couriers, COD remittance and tracking in one place. Once volumes grow, direct contracts can be cheaper.

Most RTO can be prevented before the parcel leaves. Verify phone numbers and incomplete addresses at checkout, act on NDRs (non-delivery reports, the courier's notice that a delivery attempt failed) within hours rather than days, and send tracking updates on WhatsApp so the buyer expects the parcel. Measure RTO by pincode, courier and product; the pattern is usually concentrated in a few places you can fix.

Step 7: Compliance Basics Before You Launch

Consumer Protection (E-Commerce) Rules, 2020. These rules apply to marketplaces, to brands running their own online store, and to sellers on marketplaces. Sellers must appoint a grievance officer who acknowledges complaints within 48 hours and resolves them within a month, must not post fake reviews, must take back goods that are defective or not as described, and must give the platform accurate details: total price with its breakup, country of origin, return and refund terms, and delivery information.

The 2026 amendment, in force from 1 January 2027, adds more. When you announce a discount, you must show the "prior price", defined as the lowest price in the 30 days before the discount. Listings must also show best-before dates and return-shipping costs, and sellers must share an identification number such as their GSTIN or MSME registration. Platforms must also label sponsored listings clearly and avoid dark patterns.

Legal Metrology packaging declarations. Under the Legal Metrology (Packaged Commodities) Rules, 2011, every retail package must carry the manufacturer's (or packer's or importer's) name and address, the country of origin for imports, the product's common name, net quantity, month and year of manufacture, MRP inclusive of all taxes, and a consumer-care contact. The same declarations, except the manufacturing date, must appear on the product listing online. Get your label artwork checked before you print the first run.

Two more to note: if you collect customer data (every store does), the Digital Personal Data Protection Act applies to how you collect consent and store it; and imported products face an extra country-of-origin filter requirement for platforms from 1 July 2027.

Step 8: Launch Marketing on a Small Budget

Launch with the channel closest to buying intent, then widen. For most new Indian ecommerce brands we would start here:

Marketplace sponsored ads on your best listing, to build early reviews.
Meta ads (Instagram and Facebook) with 3 to 5 different creative concepts, judged against your break-even ROAS, not likes.
Google Shopping once your product feed and site are ready.
Micro-creators in your niche, paid in product plus a fee, with a unique discount code so you can track sales.
WhatsApp and email from day one to bring first-time buyers back; repeat orders cost almost nothing in ads.

Organic search takes longer but compounds. Set up product and category pages properly from the start; our ecommerce SEO guide for India covers how. For a fuller channel plan after launch, see our guide to ecommerce marketing.

Step 9: The Metrics to Track Weekly

Launch Checklist

Unit-economics sheet with real quotes, showing positive contribution after ads
Samples tested; landed cost and lead time agreed in writing
PAN, current account, GSTIN (or GST enrolment, if you qualify for the intra-state relief)
Trademark application filed; category licences in hand (FSSAI, cosmetics, BIS where relevant)
Labels checked against Legal Metrology declarations
Marketplace seller accounts approved; listings with full disclosures and country of origin
Website live with payment gateway, COD rules, return policy, grievance officer details and privacy policy
Aggregator or courier account set up; NDR process and COD confirmation flow tested
Tracking installed: purchase events on the site, marketplace reports, and a weekly metrics sheet
Launch budget capped at a figure you can lose while you learn

Common Mistakes New Ecommerce Sellers Make

Pricing from gross margin. A 4x markup can still lose money once ads, COD and RTO are counted.
Ordering too much stock before the first 100 orders confirm demand.
Treating COD as free. Every refused parcel costs two-way shipping.
Spreading across five channels at once instead of making one work.
Ignoring TCS and GST reconciliation until notices arrive.

If you would like help setting up the store, tracking and launch campaigns, see how we work with ecommerce brands.

Frequently Asked Questions

Last checked September 2026. GST, TCS and consumer-protection details are from the official notifications linked above; all fees, rates and costs in the worked example are illustrative. This is general information, not legal or tax advice.