A while back we sold our Auckland based business in search of a new venture. We wanted something that was ‘home-based with flexible hours’. Many people share this dream of working from home and avoiding the traffic hassles, spending more time with family and friends and still make a good living.
This article is about the myths and complexities we encountered in commencing an Amazon online business.
We reviewed dozens of online business ideas and began to notice a common theme being touted by “so called entrepreneurs” as they pushed the ‘make a fortune by only working two hours a day’, concept.
Frenelle Jewellery was eventually launched, but it certainly isn’t a two-hour a day job.
Flexible and home-based “yes”, but a short working week “Hell No!”.
In getting to where we are now, we have wadded through the pros and cons of selling on Amazon and the myriad of issues to be dealt with.
Apart from dispelling the myth of short working hours, the aim of this article is to highlight just a few key points from a multitude of issues that we have learnt and you need to consider.
1 When starting a new business you are effectively reinventing yourself and the time required to learn the complexities of an Amazon business is extensive. There are no shortcuts unless you want your experience to be costly -i.e. errors can be expensive.
2 You need to consider the legal structure for your business and whether a NZ company will suffice or whether you need a US LLC (Limited Liability Company). Our advice is that the legal structure will to some extent be dictated by your product selection and any inherent risks that may present.
3 You need an L.L.C to setup a US bank account. Setting up a US bank account is not straight forward. If you don’t get a US bank account, Amazon will pay you in the currency of your residency and this means you will have to go through multiple currency conversions incurring fees. The alternative is to open a 'Virtual Account' such as WorldFirst.com (no fees), Transferwise or Payoneer.
4 You need a tax number (for non US sellers) or E.I.N (Employer Identification Number) as you cannot operate on the Amazon trading platform without registration.
5 Sales tax as opposed to income tax varies between all US states. This makes a mountain of work should you decide to comply with the most recent Supreme Court ruling in South Dakota v Wayfair, Inc. (June 21, 2018) This case decided that foreign Amazon sellers are liable to each State for sales tax - Think about this ! Amazon sellers sell across the entire 50 states and some.
6 Patent Law – you need to have a basic understanding of patent law, given you are probably going to ‘private label’ a manufactured product made out of China, India or other international supplier. Doing effective ‘patent searches’ is an art that requires a fair amount of learning and a great deal of time.
7 Tariffs got complicated with Donald Trump’s recent proclamation. 10% currently on most consumer goods out of China with the threat of 25% to come on 1 January 2019. (currently suspended)
8 Customs Border Protection (CBP) compliance can be a mine field. You have to become an expert in your chosen industry. For instance, different children’s toys need to comply with;
Sharp objects compliance
Small objects compliance
Various certifications and product certificate requirements
Suffocation warnings on wrapping
Cross Border Protection Compliance includes;
Generally engaging a US agent or freight forwarder
Providing a Power of Attorney and a US Customs Bond
Various duties, Govt agency fees, clearance fees, forwarding and filing fees
Commercial Invoices – must be correct. If not, you risk your product be stopped at the border and additional costs being applied.
9 Amazon Rules
Having traversed the Customs and Border Protection requirements you then need to familiarise yourself with Amazon’s bible. There are so many businesses and private label sellers on this platform, that Amazon has a rule for everything. It is very easy to get your seller account suspended without warning and it can be difficult to work through the issue and get it reinstated - sometimes this takes months!
Is it Worth It?
If you like working from home, are reasonably computer savvy, like flexible hours and have a penchant for learning then I would say "Yes!".
My one caveat is, enter into this business venture with your eyes wide open, be prepared to put in the time and don’t get sucked into a so-called expert course offering secret formulas for an exorbitant price.
Feel free to contact us direct to discuss.