The Seller Abroad

Using FBA to sell on Amazon from abroad… can't be that hard!

Author: The Seller Abroad

Questions – Part 2

Questions & Answers – Part 2

Welcome to the second post where I will share some questions and answers that have eventuated from the “Question?..Contact Me” form on this blog. There are some great questions that have come through and I believe the answers to these will be useful to the whole community. So let’s get into the Questions & Answers.Questions

Question 1

A question from the USA:

So I received a quote from the supplier in China, not realizing it was an FOB quote. With the customs fees and transportation costs how does one possibly turn a profit while doing this? Any advice or information would be greatly appreciated, it all seems next to impossible with the doubling of the COG’s just in transportation. Thanks for your blog, and all your information.

Answer 1:

I think this is something we can all relate to. I went through this exercise for a few products before I found one that would be profitable. I think it is important to realise that the freight portion of the cost is going to be much higher on your first ‘test’ batch of product due to the small ‘test’ quantity ordered. The freight ratio will get better on larger orders as freight per unit cost will reduce. That said, the key is to find a product where the numbers work. There are two general paths that seem to work. Number 1, you can try looking for a very small/light product to reduce transport cost; or number 2, look for a premium product that can be sold at over 3 times the cost of manufacture (FOB cost). A third option that I am yet to try myself is to source the product locally to avoid shipping and customs charges.  My first two lines of product fit into the number 2 and 1 category (in that order) and are turning a healthy profit.

I myself found this the biggest challenge in starting to sell a product. This is also why not every story is a success story. There is a fair element of risk. That said, nothing ventured nothing gained. I recommend taking the leap if you can afford the risk.

Question 2

This question is from the neighbour, Canada:

I read your cheat sheet for both shipping and tax id and have a question. When is it necessary to get an EIN? Would I be able to get away with not having one for shipping by courier such as UPS/FedEx? From what I’ve heard, they don’t really require EIN if shipment value is less than $2500, is this correct? Have you shipped smaller amount before using courier companies? What is the process with that? Do they basically take care of customs/duties and just charge you for that service?

Answer 2

To answer the question, you don’t need an EIN before importing product using UPS/FedEx. In my experience, the only time I required the EIN was when I had to collect sales tax for the items that were being sold on Amazon. My first shipment value was more than double the $2500 value and I did not require an EIN to get the product through customs.

I’d love to hear from anyone that might have had a different experience to mine. Please feel free to leave a comment with your thoughts.

Question 3:

Here is one from the UK:

I have a question regarding getting approval (un-gating) in certain categories in the US. I am based in the UK, and am looking to sell in the health and personal care category (although my product won’t actually be sold in that category, Amazon has told me I still need approval in this category). It seems Amazon will only accept invoices from wholesalers on their approved list and it turns out my China-based supplier is probably not on this list and so my applications keep getting disapproved. I was wondering if you’d come across anything similar.

For people based in the US it seems like all they have to do is buy a few random products from US based wholesalers and send in these invoices, and once they are un-gated, they can go on to sell anything in that category. But being based in the UK, I don’t think that will work as US wholesalers aren’t likely to send products to the UK, and UK documentation may not be valid for them.
Another difficulty of selling in the US from abroad!

Answer 3:

This is an interesting one. In my initial research into potential products I found that products in the health and personal care category were trending and ticked all the boxes in terms of being small, light and easy to ship as well as having the ability to sustain a healthy mark-up. That said, the complications highlighted in your question are the very reason I did not go down this path.

I’m afraid I cannot answer this question directly. The one idea that did come to mind is to have a US manufacturer package and send product to Amazon directly (not via the UK) in order to get approval. Once you have gotten approval, you can bring in product from abroad that meet all the required approval specifications.   

If anyone has experienced this issue and has a way of making it work please share your experience on the comments for this page. It would really help out a fellow seller abroad from the UK.

Questions – Part 1

Questions & Answers – Part 1

In this post, I will share some questions and answers that have eventuated from the “Question?..Contact Me” form on this blog. There are some great questions that have come through and I believe the answers to these will be useful to the whole community. So here goes the first of hopefully many Questions & Answers posts.  Questions

Question 1

This question is all the way from Macedonia:

I am not sure how I can import my goods in the USA without having a company there. My accountant told me that I need to have some entity (Company, etc.) in the USA that will be importer of the goods and I need to make invoice for the goods that will be paid by that entity. Are you doing something similar or you solved this issue on some other way?

Answer 1

You do not need to have a company in the USA to import. The Amazon recommended freight forwarders know how to set up the import details such that you can do it from abroad. I recommend having a look at the Shipping Cheat Sheet post for a detailed walk through on how to handling shipping from abroad.

Question 2

Another question from Macedonia:

Do I need to have EIN or ITIN number in the USA for tax collection in order to sell on Amazon?

Answer 2

Yes, you need an EIN for Sales tax collection when selling using FBA on Amazon. I recommend reading the Tax ID Cheat Sheet for a detailed walk through on how to obtain an EIN. 

Question 3

Third time lucky from Macedonia:

Do I need to create Invoice for each product bought by the end customer?

Answer 3

You do not need to create an invoice for each product bought. Amazon produces reports of the number of sales, amounts, discounts, etc. There are a number of reports you can get the Amazon system to generate for you to keep track of sales and cash flow.

Question 4

This one is from my local, Australia:

Is it worth it? Have read a few of your posts. Can one still make the $10,000 plus profit per month some sellers claim?

Answer 4

Good question! I’ve seen a lot of big claims out there as well. I guess it comes down to what you define as “worth it”. I can see hitting the $10,000 in revenue a month being realistic with about 3 or 4 products or 2 killer products. That said, $10,000 profit will probably require a much large business built over a couple of years with a good amount of invested capital. For me, this does not replace my primary income but serves as a good supplementary income stream that lets me live my lifestyle stress free. For example, 1 product with roughly $4,000 in revenue a month may generate $2,000 in profits a month, which is a nice little leg-up. The more products you add the better it gets. That said, you are obviously risking your investment with each new product. I am sure like any high risk investment, it pays of huge for some people (like in those claims you mentioned).

 

 

 

Demand Trends

Demand Trends and Consumer Behaviour

In this post I’m going to explore a few demand trends I’ve noticed. Demand effects pretty much everything you do to make money online. It determines your stock levels, your sell price, your profits and ultimately your business’s success. Matching supply with demand is every seller’s biggest challenge. Demand TrendsDemand is this funny variable that never stays constant and is incredibly hard to predict accurately. That said, there are certain trends that demand tends to follow. These trends are based on consumer behaviour. I will touch on a couple of trends I’ve noticed along the way and I encourage you to post any relevant demand trends you have come across as comments.

Consumer Behaviour

Consumer behaviour is a term used to try predict when and how much your potential customer will buy and what influences their decision. Knowing your consumer’s behaviour will give you a good understanding of demand. A good way to attempt to predict consumer behaviour is to look at past demand trends and determine major factors that influence purchasing habits. Here are two significant ones I’ve noticed:

  • Public Holidays – I have found that consumers are less likely to buy physical products just before, during, and just after public holidays. I would put this down to fact that public holidays tend to have their own set of expenses and events that take away from a customer’s normal purchasing habit. The obvious exceptions to this is public holidays that promote gift giving, such as Christmas, and if you sell products that are particularly targeted at a public holiday, such as Easter bunny toys. Apart from these exceptions, I’ve found that the 3 to 4 days before and after a public holiday tend to be much quieter than normal.
  • Seasonal Trends – I have found that there are certain months that consumers are more likely to buy physical products. In general, I’ve found that mid Jan through to end of March is much quieter than usual. Potential reasons for this is: customers have just spent a lot of money during the holiday season and are in saving mode, or customers have made a new year’s resolution to save better or spend money in other areas such as health and fitness. It normally takes a month or two to snap out of this lull. March has yet another factor in that it is tax time in the US, meaning people are more aware of their spending habits and tend to reign it in. On the flip side, Sept through to Dec tend to have higher sales than usual. Whilst Nov and Dec have the simple explanation that everyone is in spending mode in the lead up to the holiday season, I don’t have a great explanation for Sept and Oct being so good. It may be that potential customers are more willing to spend after restricting their spending habit for the majority of the first half of the year. Another reason may be that children go back to school, giving parents the time to shop. The first half of Jan tends to be okay sales wise possibly due to overspill of the spending mode during holiday season. I do not have direct experience, however I have heard from colleagues that information products do not suffer as much from seasonal trends, in particular not experiencing as much of a lull from mid Jan through to March.

I’ve touched on a couple of points above however there are many more variables that effect consumer behaviour and demand, hence it is so hard to predict. There are great, somewhat complex, formulas to predict demand within a couple of standard deviations based on past information, however this requires some proper teaching of how to use models based on past data. These models can even unearth seasonal trends when analysed properly. That however is two subjects in an MBA or Masters in Data Analysis degree, which in my opinion is overkill for online sellers that are only starting out with one or two products.

How to use this information

Okay, so now you know a couple of trends, but what do you do with this knowledge? Demand trends are super useful. Here are a couple of ways you can make use of trends that you’ve noticed for your product:

  • Control stock levels – Ensure you have sufficient stock during the busy months. Make sure you do not over-order and sit on a large pile of stock during slow months. Even Amazon has a stock keeping fee that will sting if you are not making sales.
  • Profitability calculations – Understanding trends will help you better estimate your profits and performance. If you thought the busy period was normal, you would grossly overestimate your profits; vice versa if you thought the slow periods were normal.
  • Pricing and promotions – You can utilise busy periods to ensure you keep your price at a premium as demand is high during this time. You may wish to discount or promote your product more during slow periods to ensure you are still turning over an adequate amount of stock.

Hope you find these demand trends helpful. Make sure you observe your sales patterns and try unearth trends that are more specific to your own product. There may be micro trends that you stumble on. The most important thing however is that you make use of this knowledge to maximise your profits and sales by taking the appropriate action. Again, if anyone has noticed any general trends, please feel free to share it as a comment. I believe it would be super helpful for everyone reading.

Returns – The Ugly Side of Selling on Amazon

In this post I highlight the ugly side of selling on Amazon, Returns! I go through what to expect, how to account for it and what action to take

The Ugly Side

So far I’ve covered a fair bit on how to go about selling on Amazon from abroad. Recall that I mentioned on the “Why This Blog? Here’s Why…” page that selling on Amazon from abroad is not easy. While there is a lot of potential and this is a relatively low risk way of ‘starting a business’, it does take hard work, patience and persistence. In this post I will cover what I will refer to as the ‘Ugly’ side of selling on Amazon so that you are well informed. I hope it does not scare you away but helps you set realistic expectations when you begin your journey.

There are a few things that you might not expect when wetting your feet as an Amazon seller. The one that hurts the most are product returns, especially when you don’t live in the USA.

Returns

ReturnsSomething you may not be very familiar with when entering the game is Amazon’s FBA returns policy. One of the reasons Amazon has grown into such a beast of an online market is because it offers its buyers one of the best returns policy out there. Keep in mind that one of the best returns policy for buyers means it is not so great for sellers. However, given this is one of the reason buyers are happy to buy private brand products and products without a lot of reviews, it is a necessary evil for people like us that wish to crack into the e-commerce world.

Now what is ugly about a great return policy for buyers? There are a few sticking points that hurt when I came across them. One is that although the standard return period is 30 days, Amazon can accept returns up to 30 days after the return period has expired. In simple terms, buyers can return an item up to 60 days after it arrived at their door if Amazon accepts it. What makes things worse is that buyers can return an item for any reason, even if it is due to them not reading dimensions correctly or because they ordered the item on a whim and did not want it anymore. There is a simple cop out option that customers can choose by selecting their reason for the return as item “not as described”. The problem is that Amazon will accept this return even if the item was exactly as described. Now this wouldn’t be so bad if the customer was refunded the total amount minus your selling fees and the product could be re-sold. That however would be too seller friendly. Instead, Amazon refund the customer the full amount and you are still left covering the selling fees from the initial sale. Unfortunately this is not where the ugly ends…

Depending on what condition the item is returned in, you may or may not be able to re-sell it. The returned product will be assessed by Amazon and be classified as either “sellable”, “customer damaged” or “carrier damaged”. “Sellable” generally means the box was unopened and the item can be sold again. This is the ideal result. Keep in mind that you still don’t get reimbursed for your initial selling fee. That said, at least you can get a new sale with this product.  “Carrier damaged” means the product had been damaged by the freight company, either when getting to your customer or when the customer was returning it using an Amazon partnered carrier. In this case, Amazon will reimburse you the average amount you get when you sell the product minus the selling fees. This result is not too bad either. The worst result is “customer damaged” returns. In this case, Amazon will not reimburse you and the product is not returned in sellable condition. Typically this means the box had been opened and taped up again in unsatisfactory condition such that the product cannot be classified as a sellable new item. When this happens, you lose in every way, especially when you live abroad. You lose the selling fee and you get the proceeds from your sale taken away. The customer receives a full refund and you are stuck with a product that cannot be sold. If you lived in the US, you could get these “customer damaged” products sent to you for repackaging before sending it back to the FBA warehouse. Unfortunately this is obviously not an option when you live abroad.

I am yet to find a way to deal with “customer damaged” returns. I have tried contacting liquidators without too much success. Happy to hear any solutions others have come across as I am sure it will help all sellers from abroad.

So how do you deal with this ugly side? You need to account for it in your profitability calculations. Track your return rate for your first test batch of product and extrapolate it across all other batches you intend to order. To be on the conservative side, I account for all returns that are not “carrier damaged” to be “customer damaged”. I consider any returns that come back in “sellable” condition a bonus. This gives me a worst case scenario. After accounting for this, if your profit calculations show a good return on your investment going forward, then proceed. Hopefully you did a thorough job making sure you had a good product to start with so that your returns rate is reasonable.

Turn the Negative into Positive

Despite this ugly side of selling using FBA, you definitely should not ignore returns. While a few returns may be due to things out of your control and due to the buyer abusing their returning power, I strongly recommend you try find out the exact reason for the return. The feedback can greatly influence your future and long term sales. Message the buyer asking the reason for their return and you will often get a response. I have done this to great benefit. It helps make product improvements and adjust your product description to ensure the right buyers (those that won’t return the product) are buying your product. This can lead to reduced return rates in the long run. After all, customer feedback is vital to keep your product in the top echelon of your niche, even if the feedback happens in painful ways!

 

Post Highlights for Returns – the ugly side of selling on Amazon

  • Returns will happen, so expect it
  • Ensure you include your return rate from your test batch in your profitability calculations
  • Follow up returns to gain valuable customer feedback
  • Make adjustments in accordance with customer feedback – Adjust product descriptions or make improvements to the next batch of product ordered

Tax ID Cheat Sheet

Getting a Tax ID

Following on from my Tax ID clarified post, I have constructed a Tax ID Cheat Sheet to walk you through the steps to obtain a federal tax ID in the USA. This should simplify the process significantly as I had to do a lot of research to get mine done. So here goes…

Tax ID – Cheat Sheet

 

  1. First check if your country of residence has a tax treaty with the US. Find out if you need to pay income tax in the US, in your country of residence or both by checking with your country’s government tax website;

 

  1. If you are not based in the US and are not going to file an income tax return in the US, then you will need to apply for an EIN in order to file for Sales Tax in the relevant US states/territories;

 

  1. If you will be filing an income tax return in the US, then you will need to apply for an ITIN (not covered in this cheat sheet);

 

  1. Live abroad and need further advice/confirmation on which tax ID you need to apply for? Call this number, +1 267 941 1000 and follow the prompts (press 1 for English, then option 4 and option 4 again)2. You will be able to describe your business activity and the IRS representative will confirm which ID you need to apply for;

 

  1. Applying for an EIN:
  • You will need to fill and submit an SS4 form;
  • You can do this online if you already have a Social Security Number or an ITIN. I am going to assume you do not;
  • Applications can no longer be filed over the phone and will need to be submitted in writing;
  • You can access the SS-4 form here1 and the official “Instructions for Form SS-4” here1;
  • Your application can be mailed or faxed – if faxing, ensure you send your fax to the number for international applications as shown on the “Instructions for Form SS-4” document on page 2 (+1 267 941 1040);
    • The IRS aim to respond to mailed applications within 6 weeks;
    • The IRS aim to respond to faxed applications within 5 working days;
  • If you haven’t heard back within this time frame or wish to follow up your application, call +1 267 941 1000 and follow the prompts (press 1 for English, then option 1)2;

 

  1. Now that you have your EIN, you can go ahead and register for your sales tax ID with states in which you hold a nexus.

 

Disclosure: I am not a tax advisor and the information provided is only a reflection of what I’ve learnt from my personal experience. Please do your own research and fully understand your obligations before making any decisions.

1Link worked on 26th Jan 2016. Use this link if you are having trouble accessing the site, go to www.irs.gov and search for the SS4 From.

2Promt sequence was accurate as of 26th Jan 2016. Please listen to options to ensure you are entering the correct prompts.

Shipping Cheat Sheet

Okay, so I’ve been getting a lot of questions of how exactly to go about dealing with shipping your product into the USA and to the FBA warehouse when you live abroad. I figured the best way to address this was to create a Shipping Cheat Sheet that takes you through the process and points out some of the sticking points. So here goes…

  • Firstly, ensure the quote from your manufacturer includes FOB – This is a service that most manufacturers offer. It means they will cover the cost of getting your stock loaded onto the ship.
  • Get a quote from your freight forwarder – Ask for a quote from FOB at the port of your manufacturer to the Amazon FBA Warehouse address.
  • Ensure customs brokerage is included in the quote – This is a fee that you pay for a customs broker to file the appropriate paperwork when your stock arrives at the US port.
    • Single Entry Bond Vs Continuous Bond – This is a decision you have to make when requesting the customs brokerage quote. There is a fee charged when you import items into the USA. This is basically a bond that you pay (and don’t get back). There are two ways you can pay this bond. Below is a description of the two options.
      • Single Entry Bond – This option, as the name suggests, covers the bond for a single shipment into the US. It is normally cheaper than the Continuous Bond (Usually between a third and half of the price) but it does take longer to clear at customs (about a week). Keep in mind that you will have to pay this bond every time you import product. Some freight forwarders have a policy of not allowing more than 1 single entry bond for a customer as this option requires the freight forwarder to mess around with an agent, which I am guessing is a waste of time for them.
      • Continuous Bond – This option, covers the bond for your shipments into the US for a period of 1 year. It is more expensive that the Single Entry Bond however it is much quicker (only takes about a day to clear at customs). Your freight forwarder will not require an agent to fulfil this option.
    • Make the Decision – I personally went with a Single Entry Bond as I was strapped for cash when I started and was unsure about how successful my product sales would be. In hindsight, I should have gone for the Continuous Bond from the get go. I now have a Continuous Bond in place. You will have to decide what works best for you and inform your freight forwarder.
  • Keep the freight forwarder informed – Despite you providing an expected shipment date, the freight forwarder will likely wait till you remind them to start booking things in. I would recommend you keep in touch with your manufacturer and give the freight forwarder a reminder a week prior to the completion date. At this stage, the freight forwarder will likely ask you for some paperwork and get you to fill out ISF form.
  • Submit Paperwork – You will likely have to send the freight forwarder an official invoice and a picking slip from the manufacturer. This cannot be done until the goods are complete so allow at least a week between completion of manufacture and the ship sailing. Once the freight forwarder receives these documents, they will use their foreign agent to book space on the next ship. These usually leave every week or two. The most complicated form you will need to submit is the ISF form, details of which will also be requested by your manufacturer in order to provide FOB service. Fortunately you do not have to wait till manufacturing is completed to fill out this form.
  • ISF Form – This form documents all entities involved in transporting the goods. The most confusing part about the ISF form is knowing who each entity is. If you have seen one, it basically asks for consignee details, importer details, container stuffing and loading details, ect. The ones you will need to worry about are Importer, Consignee, Notify Party, Seller, Manufacturer, and Ship-to Party details. Keep in mind that not all this information may be required, however I had to provide all of it my first time so I’m going to cover all bases for you. All other details will be done by the manufacturer or the freight forwarder. Let me try clarify these entity references for you as it drove me insane trying to understand what information I had to provide for which field.
    • Importer – This is yourself. You will need to provide your name and an Importer of Record Number, which is usually your Federal Tax ID. What’s that… you don’t have one? Nor did I! Luckily they also accept the following details in lieu of the Federal Tax ID: your passport number, country and document description, date of birth. So it should look something like this:
      • Name: Sherlock Holmes
      • Importer of Record Number: M1234567, Australian Passport, 22nd January 1986
    • Consignee – This is again yourself. Only issue is that this field sometimes requires a physical address based in the USA. If not, you can just say same as Importer. But what happens when they ask for an address? You use your Amazon FBA Warehouse address. It should look something like this (take note of the name section):
      • Name: Sherlock Holmes C/O Amazon.com
      • Address: 123 Warehouse Road, San Francisco, CA 12345-1234, USA
    • Notify Party – This is going to be the same as your Consignee. Sometimes they ask for the address details under Consignee sometimes under Notify Party.
    • Ship-to Party – This is just a name and Amazon warehouse’s address. Should look like this:
      • Name: com
      • Address: 123 Warehouse Road, San Francisco, CA 12345-1234, USA
    • Manufacturer – This is your manufacturer’s details. You will need to provide the name and physical address
    • Seller – In most cases this is the manufacturer, unless you are buying from a middle man. In which case, put in the middle man’s name and physical address.
    • Buyer – They sometimes ask you for buyer details. If they do, you can put in your name and your actual physical address in whichever country you live in. It does not have to be a US address.
  • Keep up Communications – Once the manufacturing is completed, promptly forward the invoice and picking slip to your freight forwarder. Ensure you inform them that the product is good to go. They will then communicate with the manufacturer using their agent in the country of manufacture to arrange shipment loading. This is around the time I also mark the FBA shipment on Seller Central as “shipped”.
  • Pay Freight Forwarder – At this stage your freight forwarder will likely request payment prior to commencing shipment. I recommend doing this as quickly as possible to avoid delays.
  • Wait – Now you wait until the product hits your Amazon warehouse. Most freight forwarders will inform you of the progress of your shipment along the way. If you are getting nervous, you can always email them to ask for an update. I tend to do that a lot! Be prepared to wait for a while. Shipment from China to USA takes about a month on the water. After that you need to clear customs (time varies depending on the type of bond you chose). Then there is the land portion of the freight which cannot happen till Amazon receives communication from your freight forwarder informing that the product is ready to send to the warehouse. Amazon will then have to give the freight forwarder a delivery appointment. During busy periods such as Christmas, you might have to wait a week or two to get an appointment.
  • Product Received – Amazon will inform you once your product has been received. Now you are good to go.

Hope that helped… Good Luck!

Powered by WordPress & Theme by Anders Norén