The Seller Abroad

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

Category: Amazon Admin

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).

 

 

 

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

Creating a FBA Import Shipment… The Big Decisions

I thought I’d sneak this post in as I’ve had a few friends that have got stuck when creating an FBA import shipment. This step fits in between getting your product manufactured and booking in the freight company. An FBA shipment is basically your way of lodging paperwork with Amazon identifying exactly what, when and how you are shipping items to the FBA warehouse. You can create one of these by going to the “Manage FBA Inventory” option under the main “Inventory” drop down menu.

Import Shipment Labelling

FBA Import Shipment

There are a couple of key decisions to make when creating a shipment. The first one is pretty easy; do I want to label the product or do I get amazon to? In my case, I chose to label the product myself given that I had purchased the UPC code. My manufacturer was more than happy to print and stick the barcode labels for free. I recommend going down this path as Amazon say they will charge for labelling, and I’m going to guess the charges would be somewhat unreasonable.

Import Shipment FBA Warehouse Selection

The second however gets complicated; do I want to ship to the FBA warehouse or warehouses Amazon allocates or do I want to choose my own? This is a bit of an interesting one and it is something you might try chopping and changing until you find a system that works for you. You will find that at times when you create a shipment, Amazon will request that you send your stock to a couple of different warehouses. These are usually warehouses that best suit Amazon’s distribution of the product. However, shipping to multiple locations can be a pain. There are a couple of ways around this.

  1. Enable the “Inventory Placement Service”. When you enable this service and create a shipment, Amazon will only give you the ship to location of one FBA warehouse where you can send the entire order. Note that there is a fee for this service. In order to activate this option, you will have to go the “Fulfilment by Amazon” tab under the “settings” menu. Here you will see a section called “Inbound Settings”. Click in to edit this section and choose the “Inventory Placement Service” tick box under the “Inventory Placement Option” section.
  2. Enable the “Premium Placement Service”. This is the method I used for my first shipment. It is the easiest but is quite expensive! Not only does this option let you ship to the one FBA warehouse but it also lets you choose which warehouse you ship it to. So you can pick a warehouse close to the port your ship will be docking at. Again, do not sign up for this without checking out the fees involved. In order to activate this option, you will have to email seller support by creating a case log and request this service. It will take 2 to 3 weeks to set up.

When deciding between going with the standard ship to locations or the two alternative options above, make sure you consider the additional fees involved as they can be quite steep. A painful lesson I learnt after my first shipment was that the fees for either option are charged in a one off lump sum about a fortnight after the stock arrives at the warehouse. I was initially operating under the premise that the fees would be charged per product as they were sold, so you can imagine my shock when I got hit with a massive bill!

When I did the sums, it worked out that he most cost effective way was to use the default FBA warehouses that Amazon assigned to me. Most good freight forwarders can pick up at one location and ship to multiple without too much trouble. I have avoided any sort of placement service option for my second shipment. The numbers work out better. Worth running the numbers yourself though as it largely comes down to your product weight, or dimensional weight (a tricky metric Amazon like to use), which Amazon use to calculate the service fees. Make sure you read up on dimensional weight on the Amazon website. It could mean the difference between a $700 and $1,100 fee… ouch! My take on it is that any premium kind of service you sign up for will likely be less cost effective but more convenient… makes sense right?

Those are the big decision when it comes to creating a FBA shipment. So take your time, do the sums and get all your details in. As soon as the shipment has been created, it is time to tackle the logistics side of things.

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