[Ask Henry] – Having An Online Business While Living in the Philippines

Question:  “My question is about the legality of online retail businesses in the Philippines.  Is it legal for me, as a retired expat living in the Philippines, to have an online retail store which sells merchandise purchased and shipped from China and/or America and sold through the website to be mailed to the philippines buyer?“ — From Donna W. Henry:  Hello Donna.  Well, I’ll start with the disclaimer that I’m not an attorney or accountant so, I can only share with you my thoughts, friend to friend.  But here’s the situation as I understand it.   If you are a Single person (unmarried) then you’re required to get an extension on your Visa on a monthly basis.  Under such circumstances you are considered a ‘Tourist’.  A tourist on a really long vacation, but still.. a tourist in the legal sense.  

Now, as a tourist, you cannot hold a job here in the Philippines unless you get a Visa specifically allowing you to do so.  So.. in regards to working “offline” at a factory or physical business here, you’re not allowed to take up a ‘Job’ here. Now.. that being said.  Because you are a Tourist, if you happen to have an online business it only makes sense that during your extended vacation here in the Philippines you will need to continue running your business.  Where you log into while here is your private matter.  Very few, in fact I can’t think of any offhand, people actually ‘host’ their website on an ISP server that is located here in the Philippines.. so it can’t even be said that the business is even physically present here.  If a person’s online business is on a server with say, GoDaddy, whose servers are in the US and some abroad.. then all you’re really doing is monitoring your business from afar same as making a business call to your restaurant in your home country.  Now, just since we’re on the subject.. living in the Philippines does not mean you don’t have to file taxes in your home country just because your business is online and you’re not living in your home country.  You still have to file.  Right now it’s up to each individual State in the US whether or not Sales Tax is required on internet purchases.  If I remember correctly, California does this and it drove Amazon sales from CA down the toilet for Californians.  After all, why buy a book from an Amazon seller in CA when you could order it without sales tax from any other Amazon seller outside of it.

Also, even if the business is not registered as a business.. you still need a way to collect the money online.  Most people opt to use PayPal since it’s so well known, but there are lots of other online CC processors available too.  CCBill is another well known, trusted industry leader.  When you set up an account with a CCard processor they are required to ask for your Social Security number.  (If you have an EIN or ITIN number, you can use that.)  So, whether your online business is registered or not.. if the IRS ever wanted to audit you (shudder).. they would pull up any money that passed through the hands of your SS#, including income via PayPal, CCBill, etc. But to answer your question succinctly, the answer is; “Yes.. you can have an online retail store while living in the Philippines.”  In fact, many expats do this already to supplement their income.  I myself own the following online store;

A Few Things To Know About Running An Online Store Overseas

First let me share with you my philosophy regarding any kind of business.  I am a big believer in the Free Market.  If a multitude of vendors are selling the same thing, the best businesses will prosper while the others just fade away.. leaving the Consumer with the best service and options and rewarding those who provide it.  I also believe there is PLENTY of business out there, more than enough for everybody.  But you have to be able to compete well to get that business. Take for instance, selling cell phone accessories online.  There are lots and lots of people looking for cool, new covers for their phones, earplugs, screen-protectors, etc. and they are hungry for something cool or durable at an affordable price.  There is no shortage of consumers, almost everyone even in the Philippines and India has a cell phone, not just first-world countries.  But.. there are also a lot of other vendors/businesses out there looking to get a slice of that business.  Lots of competition whether it’s an online store, eBay auctions or a kiosk at the mall.  People here buy them cheap from China and I see both cell phone accessories and cell phones sold practically every ten feet along the street and malls here. So.. even though there are tons of consumers who need or want your goods, the real trick with any business (online or brick-and-mortar) is to attract buyers to YOU.  ‘Traffic’ is the key to a successful business.  For brick-and-mortar the old adage is “Location.  Location.  Location.”  

Online, it’s an even playing field, location doesn’t matter.  That’s good.. and bad.  Because now you can compete with anybody else but.. you gotta get attention to your site before you can see any sales. There is such a thing as ‘conversion rate’, usually measured in percentage.  Basically, out of every 100 persons who ‘visit’ your site.. how many of them make a purchase?  Is it five?.. then your CR is 5%.  But a CR of 5% is actually pretty darn high unless you’re a major online player.  A new website that simply ‘exists’, and is only advertised to friends and family can expect a CR of about .1%.  That’s about 1 sale for every 1,000 visitors.   You may have great inventory and fantastic prices.. but just like a lot of fantastic garage bands I’ve heard play in small dives.. unless you get noticed, the returns are kinda dismal.  I’m not trying to discourage you.  I’m just telling you up-front that you gotta have some way of “getting the word out” to the Internet World that out of all the web-sites selling widgets.. they should be buying them from you.

So, How Do I Get Traffic?

Remember the story of Rumpelstiltskins?  The little guy who spun straw into gold?  That’s how you get traffic:  You make it out of thin air.  Not an easy thing to do always, but obviously lots of people manage to do it in a variety of creative ways.  One thing you need is ‘Branding’.  A logo, catch-phrase that you consistently put ‘out there’.  Out where?  Well, as it turns out I recently wrote an article on my other blog about free ways you can market your product online, you can read it here, “Easy and Free Ways To Market..”  But wait.., there’s more!  I also wrote another free article titled, “7 Places You Should Be Advertising Online.. For Free”, so check those out sometime. You can also hire people to do this for you.  This is called SEO (Search Engine Optimization).  

Now, first.. let my share my own personal opinion of SEO providers.  In my book, 90% of them are snake-oil salesmen.  They have absolutely no clue what they’re doing.  Many of them subcontract your SEO work out to someone else online.  On top of that, others simply bought some program that creates “back-links” on websites that nobody ever reads with the idea that it will somehow fool Google into thinking lots of people are talking about your website and push you higher into the search rankings.  The problem with that is, Google is not stupid. The algorithms Google employs to determine a site’s “importance” (relevancy, actually) also takes into account where those links came from.  So, a back-link from some link-farm isn’t worth squat.  Another angle some inexperienced SEO guys make money off is by simply duplicating your content by reposting it in other places.  Now, it might seem at first that if you exist on more websites it will make your site seem noteworthy to Google.  But, again, Google knows via its spider-bots that the content originally came from your site and all the other re-posts are just duplicated ‘noise’.  In short, it’s my opinion the vast majority of small-time SEO, one-man outfits are either dishonest or incompetent and will actually damage your online presence in the long run with any number of tactics that are at best, amateurish and over-priced.

But, just like looking for Love.. it is out there.  Some SEO guys are what they call “White Hat” SEOs.  They only use ethical methods to “possibly improve” your standing with Google.  But even with them, it’s an ongoing campaign.. which means money you pay to them for months before they can deliver lasting traffic.  And just like the guy who says, “I love you” with his fingers crossed behind his back.. many SEOs claim to be White Hat and are not.  So it’s back to ‘buyer beware’ for you. What I can tell you is this with surety; If anyone just builds a website, finishes it and does not add fresh content to it.. it will sit there and die as surely as a plant that doesn’t get watered.  It’s inevitable.  Website stores NEED traffic to survive and they don’t do it on their own.

So What’s The Solution?

Pretty simple really.  And for $49.95 I’ll sell you my eBook on how it’s done.  Ha!  Just kidding.  Although that is exactly what some people will charge you for what I’m about to tell you for free right here.  Ask yourself; “How do you attract Ants?”  The answer is obvious to anyone who ever dropped a piece of cake or donut on the floor and left it there.

You Need A ‘Honey-Pot’.

There you go.  In a nut-shell, there is my online course and thesis in Online Business.  Congratulations, you just graduated.. now go make it happen.  Seriously, it’s not any more complicated than that.  You attract people with something.. anything, that you give away for Free.  Yes, free.  Because the surest way to attract people is;  “Give them something for nothing.”  It’s ingrained into our human-nature.  If something has value.. and someone is giving it away for free.. people will check it out, take it and then figure out the rest later.  When you walk through Costco and they’re giving away free samples of cheesecake or smoked sausage, you know you have to practically wrestle within yourself to stay away.  After all.. it’s free!  That is their ‘Honey-Pot’.  Why do they keep giving away free samples?  Because it WORKS.  Sales go up with it and drop without it.  They’ve run the numbers and they can pay someone to give out the samples and increase their sales more than enough to pay for it. When I was about 19 years old, I went to the movie theater one day and at the door a salesman was giving away.. for free, a brand new Gillette Shaver.  It had a real metal handle, weighty and it was free.  So, yah.. I took that home and used it.  Well, guess what?  Eventually the razor head got dull so I inserted the extra shaver head that came in the package and used it another month.  And would you believe it?  I continued to buy Gillette replacement heads for that disposable shaver with the cool, metal handle for over FIVE YEARS.  Before that I only bought super-cheap BIC shavers made of plastic.  But because they gave me something of value for free.. I walked right into their honey-pot and they got my business.

Think about it.  How many times have you wanted a program that did something.  Did you go to the store and pay for it like most commercialized drones?  Or.. did you check somewhere like Cnet.com or FileHippo and get it for FREE?  Did you ever wonder to yourself;  “Why would someone spend all this time creating a great piece of software only to give it away for free?”  Well, once you start installing it you kinda get led into installing some toolbars or advertising unless you opt-out of it during installation.  But most people just keep clicking “OK” until the program loads.  Also, once it’s installed they now can offer you either a ‘Full’ or ‘Premium’ version.. just click on their box to order.  See it now?  The free software was the Honey-Pot and it got them “in the door“.  Or, more precisely.. on your desktop to sell you the upgraded version.

What can you offer for free as your Honey-Pot?  Well, unless you’re a software programmer, the next closest thing you can write is.. a Blog!  Give to people, for Free.. something of value.  Something they enjoy.  Something with no strings-attached.  No site membership fees.. just free online goodness that is either useful or entertaining.  Something they will want to re-post to their Facebook or Google+ friends and say, “Hey!.. look at this cool thing I found.”   And whether you’re in your home country or the Philippines.. it doesn’t even have to be a travel-blog.  It can be a blog about cooking, motorcycles, funny photos, politics, marital advice columns, tech stuff, computer repair, sewing, playing guitar or just about anything under the sun that people have an interest in!  I firmly believe that even if you tried to come up with a topic you thought NOBODY would be interested in.. if you built a site on it and wrote daily on it.. the nutjobs would come out of the woodwork and love your site.  I’m serious.  I’ll bet if you devoted a site to “crazy looking doll heads”, “photos of flies”, “gummi worms”, “japanese game shows” or any other nutty thing you could type into Google.. people are already looking for content on that.  

The world is a big place and all you need is a small slice of them to come to your site! Take a look at my site here.  I love talking about the Philippines, it’s my passion.  I love sharing my adventures.  And, as you’ll notice to the right.. I have ads to my online store as well as affiliate ads and Google Adsense to bring in revenue any time someone clicks it. Whether they buy anything or not, each click brings me some revenue.  The articles, photos and videos.. it’s a pleasure to share those for free because I also get to meet some pretty cool people, both online and offline when they drop by Cebu or Bohol.  It’s a win-win for everybody.  My readership has gone up every month since I began writing here on a regular basis.  I still have a ways to go, but the methods do work.  Anyone promising you overnight Google placement.. it will disappear just as fast the moment you stop pumping money into it.  But provide something of value for free.. and you’re not creating a need for an advertising budget.  Instead, you let other advertisers pay you. So, my advice to anybody thinking about having an online store is that the store needs traffic and the surest way to get that is to provide people with something of value.. for free.  Constant, fresh articles will do MUCH MORE to attract Google’s attention and move you up in the rankings than most money thrown to the wind with a lot of these SEO outfits.  And using the free, online marketing methods I linked to above in my two articles will help as well.

Now, just like Love.. sometimes you can do all the right things and.. still end up sad and lonely.  There is no overnight, sure-fire solution or else word would have gotten out and everybody would be doing it.  I put a lot of time into this blog.  I want to provide the best content I possibly can.  And, I have fun doing it.  As an old Greek adage goes, “Anything worthwhile never came without effort.” Another suggestion for anyone hoping to rely on online income for living overseas.. start now.  While you are still in your home country, start now.  If you’re lucky you’ll begin seeing even a little money drip in after 6 or 9 months.. and that’s if things go fairly good with your readership.  The time to start is now, while you still have your ‘day job’, routine or whatever at home.  You may have to try a few ideas, just pay attention to what works and modify your plan as you go along.  It’s about learning and persistence.

You also asked about, “..an online retail store which sells merchandise purchased and shipped from China and/or America and sold through the website to be mailed to the Philippines buyer.”   Here are a few thoughts that come to mind.  Look into it more for yourself since it’s your vision and maybe there’s an angle I’m missing here. Shipping costs within the Philippines from one island to another are very fair.  Cheaper and faster to me than what you’d pay for UPS or FEDEX back in the States.  I’ve shipped stuff from island to island, overnight delivery, for about $6.   I won’t go into details on who this happened with, but I once bought an ebook online about various ways to make money while in the Philippines.  Of the many ideas it had the one that intrigued me was the online store idea.  But in the book it basically said that one idea is to have an online store.  It didn’t go into who was the best shipping company, rates or the logistics of getting a pizza delivered to another island.  So.. I emailed the author asking for that info, figuring he’d forgotten to include it in the book.

Well, he basically felt that was ‘proprietary information‘ which was worth too much to include in the book at that price.  Hmm, this was no cheap eBook.  Most eBooks go for less than $9 and this one cost me over $30.  So, since he didn’t tell me, I simply asked a local Filipino, “Who is the most reliable shipper for island to island deliveries?”  Their answer in a heartbeat was a local company called “LBC Shipping“.    Not only do they have good rates, but they are very professional and provide online tracking.  In addition, they have an office in practically every decent sized mall I’ve ever been in, so convenient as well.  If your business ever gets to where you’re delivering several packages a day, they’ll even pick up from your Philippines address.  Good company, I use them exclusively for my store and I also use them to transfer money instantly from island to island.  Much cheaper rates than Western Union. Now.. shipping from the Philippines to the US, or outside of the islands, wow!.. what a sticker-shock!!  I checked both LBC and DHL Shipping and the cost to send my Mom some 14″ dolls was in the range of $120.00 USD.  Yah, that’s not gonna happen.  (I went online and ordered her flowers from the florist in her town instead.)  I prefer LBC for shipping within the Philippines.  But I prefer DHL for sending anything International, whether it’s incoming or outgoing to the US or Philippines.  But because sending packages is so expensive, I’ve only sent original documents when it was absolutely necessary for about $30.

You may be familiar with Balikbayan Boxes, or not.  But with those you can ship a pretty big box about 45 pounds worth of stuff for around $90.  Some say delivery is anywhere from 1 month to 2 months.  It goes by ship so, I guess it all depends on how quickly or slowly they process those freight containers once it hits the dock.  So it’s best for shipping internationally to your family and friends, but doesn’t make for a good choice with business. Now.. when I got here I noticed something.  Computers and laptops are very expensive.  A $350 laptop in the US goes for about double that here in the PH.  The buying market is smaller and the tariffs jack up the price a lot.  I had the idea of importing laptops I’d get off eBay, have them shipped via Balikbayan and resell them here.  But the more I thought about it, even having a price edge.. selling here is not easy when so very few people have money to spend aside from foreigners.  And there’s always the risk customs demands a huge tax to pick up the box if they notice it.  I know how to build PCs and I can build one here for about $150 even getting the parts at mall prices.  But selling them.. not so easy.

So.. those are my thoughts and suggestions regarding an online business, whether from home or overseas the same rules apply.  There are some useful links we covered, so be sure to check those out.   One more useful link I’ll leave with you is one that has lots of free articles and videos about online business, which is ‘SmartPassiveIncome.com‘.  Peruse their site and I’m sure you will come up with some other ideas and methods to consider.  But most of all, since it will require a lot of your time and perseverance . choose something you enjoy.  It will make the ‘work’ a bit more enjoyable.

Post script:  One last comment that came to me regarding buying from China.  There are some great deals you can buy, especially wholesale, from China.  But start small because you want to know the quality first before committing to a big order.  Also check what the actual shipping costs are and whether there are any added tariffs when it enters Philippine Customs you need to pay.  Usually tech items come with a tariff, appliances and such.  General rule of thumb.. if it’s going to hurt local Philippine business.. they add a tariff to jack up your overhead.

Henry “Reekay” V.
www.lifebeyondthesea.com