Apr 29 , 2021
Did you know that it's possible for anyone—whether a US citizen or not—to sell on Amazon US provided you sell fewer than 50 items on the marketplace? Once you start selling 50 or more items, things become more complicated. From that point, you will need to hold an appropriate taxation ID, along with some other requirements to continue selling.
Another scenario to consider is that anyone choosing to use Amazon's fulfilment services (known as Fulfilment by Amazon or FBA) will need to form a United States company at the outset. If you envisage selling greater than 40 items monthly, this option will generally turn out to be the most cost-effective.
Amazon presents as an enormous opportunity for anyone to sell physical products within the United States—whether located on US soil or not. The trick is to consider your options and choose the right business structure and selling account to suit your needs.
Conditions Required to Sell on Amazon US
There is little doubt that Amazon is the leader in the e-commerce sales industry, as well as being one of the most frequented websites in the world. To become a seller on Amazon US, you will either need to create an Amazon account and then set up a product feed, or you can physically provide your products to Amazon and hand over the responsibility of order fulfilment to Amazon's dedicated team. Whichever way you choose, you will need to consider the legal requirements and ramifications.
The requirements applicable to non-US residents are similar to those that apply to US residents. These include the requirement to obtain a Federal Employee Identification Number (known as a FEIN).
Creating a United States Account
The first step to begin selling on Amazon US is to create a seller's account on Amazon's platform. This will necessitate making a few crucial decisions before you can finalize the creation of your new account. Most importantly, you will need to choose a seller plan and the best fulfilment method to suit your product and your business needs. Your decisions will greatly affect the fees payable for importation and sale and ultimately the profitability of your venture.
Choosing Between a Professional or Individual Selling Account
The primary difference between a professional and an individual selling account is its fee structure. Individual sellers incur fees at the rate of 99c (USD) per item sold. This plan tends to be most economical for people selling less than 40 items per month. Professional sellers incur a fixed monthly fee of $39.99 (USD) which becomes more economical when selling more than 40 units per month. Professional plans also include advanced reporting and advertising features along with custom shipping rates.
Regardless of the selling account you choose, you will incur referral fees on every sale. These fees tend to range between 8 and 17 percent, with larger categories like electronics, beauty, and clothing and accessories including greater fees.
An additional option that may be worth considering, is to become a seller through Amazon's Vendor Central program. This involves selling your products directly to Amazon and allowing them to on-sell your products to their customers.
The benefits of this method include passing the responsibility for obtaining sales directly to Amazon, with potential drawbacks being the personal relinquishment of decisions relating to the placement and pricing of your products.
Making Fulfilment Decisions
Amazon's Fulfilment Services
Amazon's fulfilment services are simple to use for US residents and involve a more complicated process for non-residents. Amazon's fulfilment services allow you to use one of Amazon's storage facilities to store your products before sale. Once a sale occurs, Amazon's staff take responsibility for fulfilling the order and shipping the products to the customer on your behalf. Perhaps one of the greatest drawcards of Amazon's fulfilment services is that it gives you access to the Amazon Prime shipping program—the most popular shipping method for Amazon customers.
Amazon's fulfilment services are often preferred by sellers with larger sales volumes as the responsibility for order fulfilment, returns, and customer service shifts to Amazon, ultimately lowering your expenses and increasing the opportunities to make sales. Amazon's fulfilment services are available to sellers inside and outside of the United States.
Fulfilment by a Third Party
Third-party fulfilment involves using an external logistics company to fulfil orders sold on Amazon, including picking and packing the orders, arranging the delivery, and dealing with product returns. Many third-party fulfilment companies provide excellent value for businesses of varying sizes and order volumes.
Understanding Profits and Fees
Fees that are frequently overlooked when selling items on Amazon US as a non-resident include those relating to currency conversion and international bank transfers. Transferring United States dollars to Australian currency can incur transaction fees of between 3 and 5 percent—a significant fee that must be borne in mind when calculating potential fees and profits.
By carefully choosing your banking partner, you may be able to significantly reduce your fees. Airwallex, for example, offers global business banking accounts that are fully compatible with Amazon's selling platform. Airwallex offers banking products with no minimum balance requirements or ongoing fees, coupled with low currency conversion fees—as much as 90% less than similar products from other banks. Airwallex also assists with cash flow by offering instant access to your foreign currency without unnecessary waiting periods.
Every seller's circumstances are different, and it is worthwhile weighing your options and comparing the fees and potential profits associated with Amazon's fulfilment program versus trading as an Amazon seller.
Registering a US Business
At this point, it is time to decide whether it will be more cost-effective for you to operate as a business or an individual.
Regardless of the location of your business, it is generally recommended to register a United States business before starting your selling journey on Amazon—particularly if you envisage selling more than one or two items per month. Operating as a registered business can provide tax benefits and is generally a smoother process overall. It is also a requirement to operate as a business if you plan to create a vendor or merchant selling account. As a bonus, business registration will help to protect your assets should your business run into trouble.
The process of opening a US business from overseas will be a lot smoother if you use the services of a third party who can prepare and lodge the required paperwork on your behalf.Request a consultation