New markets. Through thorns to Amazon
Ukrainian business knows how to sell their products on domestic marketplaces and classified sites. To go to the world's largest online trading platform Amazon is decided units. In times of crisis, the opportunity to sell on the site of this online giant could be an effective solution for maintaining and developing a business. The subtleties and pitfalls of entering Amazon are explained by Andrey Matyash, Managing Partner of 4B Law Firm, a certified service provider for Amazon entrepreneurs.
Amazon sales today account for nearly half of the US e-commerce market. In monetary terms, it is $ 200 billion per year. About 5 billion different products are sold annually at this site, and daily orders come from 28 million customers.
What are you, Amazon?
Amazon is the benchmark that all other sites are equal to. First of all, it is 100% customer focus and the highest level of service for customers. For the global trading platform, they have the status of "celestials." They will be delivered within 24 hours, returning the goods after 30 or even 60 days, online TV services, discounts and numerous sales. And this is only part of what customers get. On Amazon, sellers often have to compete fiercely with American and Chinese entrepreneurs, of which about 80% are here. This struggle continues in the US legal field, where they protect and respect intellectual property (TM, patents, copyright). For violation, they can quickly block your account.
To go or not to go?
Despite successful cases of business scaling through a “store-all-in-the-world” and a general trend towards the growth of e-commerce, Amazon is still underestimated by Ukrainian entrepreneurs. Why? In my opinion, this situation arose because a significant part of domestic manufacturers are not too versed in online sales. And if we are talking about organizing sales in other countries, then even more so.
On the other hand, around Amazon, due to some “information businessmen,” a “halo” of easy money has formed. This happened because of the abundance of advertising that they had been "tweaking" for a long time, promoting their selling courses on Amazon, like "Spend 1 hour a day and you will have your own business in the US with a profit in dollars." This was one of the reasons why Ukrainian companies do not take seriously and do not regard this giant marketplace as an opportunity to enter international markets and increase their own business.
It should be noted that the online giant provides the ability to quickly deliver goods and receive payment, store products in a warehouse and other services. All this helps the business not to waste time searching for warehouses, couriers, organizing logistics. But an entrepreneur can focus on marketing and improving product quality.
Another significant advantage of scaling a business through Amazon is its low threshold for entering the international market. Compared to the traditional export model, developing a business through e-commerce tools requires significantly less investment.
Hit the mark
To understand whether your product will “shoot” at Amazon and whether there will be demand for it, you first need to determine who it is intended for. Amazon is a gigantic online marketplace where ordinary people buy. Therefore, the product should be directed to the B2C market. It is not easy to bring products designed for wholesale sales or exclusively to B2B customers.
Secondly, the volume and weight of the product are of great importance. Heavy, fragile and voluminous things (furniture, mirrors, etc.) do not sell well online. Amazon’s high commission, charged in such cases for storing and delivering the goods, can “eat up” all the revenue.
Third, it is important to analyze demand. I advise you to check if there is a demand for a similar product, what are the sales volumes of future competitors. This can be done using special software or contact experts who can make such a miscalculation. If there is no demand at all or if Amazon sells a similar product (yes, it also sells its products on its own site), the chances of success will be scanty.
Step by step
In order for the entry to the global platform to be successful, several important steps must be taken.
Step 1. Determine who will oversee the product launch and sale process on Amazon.
If you have done all the preparatory work and realized that you are ready to enter the global platform, first of all determine who will be involved in this process. Trading on Amazon is a tough and daily process, especially at first.
Consider the option if the owner of the business takes responsibility for this. In this case, the primary task will be to obtain the necessary knowledge and technologies for working with the site. This can be mastered at special courses, the cost of which ranges from $ 200 to $ 2000. There is also the opportunity to negotiate individually with the Amazon Coach. Usually these are successful and experienced sellers who are ready to share experience and tips with beginners (their fee is $ 1500-2000 per month). You can also apply for the service to specialized companies that organize such a turnkey exit (tentatively for $ 10-25 thousand).
Before starting, it is important to check the product for a patent in the United States. Neglecting patent research, it may turn out that a certain product already has a patent. And this means that by selling such a product, an entrepreneur will violate other people's rights to it. If this is discovered, Amazon will block the account or the patent holder will file a complaint or even a lawsuit.
Step 2. Check the product against the US brand base
This must be done if you are developing your own brand. Amazon imposes strict sanctions for violation of intellectual property rights: the product page or account will be blocked, and accordingly, sales will also stop.
Also, before the start of sales, it is necessary to check whether additional certification is necessary for the product. So, for medical products, medicines, food, feed, cosmetics, you probably need an FDA (Food and Drug Administration) certificate. When these steps are completed, you can go to Amazon itself. The next 3 whales are product page creation, packaging and advertising.
Step 3. Create an Amazon Product Page
It is important that it looks attractive to potential buyers. Therefore, take care of high-quality professional photos and an accurate description of the goods. All texts must be written in English, so it is advisable that they be compiled or verified by a native speaker.
Step 4. Take care of product packaging.
Goods from the manufacturer get to the logistician, then - the ocean to the other end of the world. Then, the customs and customs clearance, the next link is the distribution warehouse and, finally, the goods are in the Amazon warehouse and appear in the seller’s account.
But this is not the end of the supply chain. After the purchase, the goods begin to move to the buyer. That is, he is constantly in motion. And that is why the packaging of each unit of goods is of great importance. Quite often they save on it, and the product comes rumpled or even damaged. The Americans are so spoiled by Amazon that they are likely to return the goods with damaged packaging back, ordering instead from another seller. Yes, and leave a negative review on the product page. And reviews strongly affect future sales.
Step 5. Advertising
As in any other business, you need to pay attention to marketing and advertising ("internal" on Amazon and "external" on other resources). To promote products, standard tools are used with a focus on Internet marketing and internal advertising on Amazon.
Underwater rocks
You should also avoid the most common mistakes entrepreneurs make when they go to Amazon.
1. Start sales without first analyzing the demand and competitiveness of the product.
Such a preliminary audit makes it possible to correctly calculate their strength and reduce financial risks before starting sales. The next step is to draw up a business plan taking into account the cost, the cost of logistics services to the country of destination, the calculation of the estimated payback period, sales forecast and articles for unforeseen expenses.
2. Do not protect intellectual property.
It is important to pay attention to the protection of intellectual property, namely: registration of a trademark, check for a patent. If a company has its own product, but does not have a registered trademark and uses a stranger or comes up with a brand name that is consonant with an already registered one, there is a big risk of losing financial investments. Indeed, Amazon inflicts severe penalties for infringing intellectual property rights.
We had a client who had successfully run business on Amazon for several years. But once the owner of the patent for the goods appeared, and the client’s account was blocked. The lawyers of our company found a way out of the situation, however, the whole time we were looking for a solution, the client did not make a profit, because his sales were suspended.
I note that the TM registration procedure is long-term. For example, in the USA it takes 8 months. Therefore, it is advisable to run it earlier.
3. Do not take into account the tax bases of jurisdictions where goods are sold.
The mandatory taxes that entrepreneurs who scale businesses through Amazon will deal with include:
● Sales TAX is a sales tax in the United States. Its size depends on the laws of each state and can range from 4 to 10%.
● VAT - value added tax, which is applied in the EU and the UK and amounts to 18-23%, depending on the jurisdiction.
In order for a business on Amazon to be successful, it needs to be conducted as transparently as possible and focus on building a brand and quality service.
