Wholesale selling on Amazon is where the seller has existing relationships with manufacturers or distributors. The seller negotiates buying terms with the manufacturer or distributor and then resells the products on Amazon.
There are many tax advantages for high income Amazon FBA sellers in the United States. As accountants, it is our responsibility to make this as easy as possible for our customers. Here, we review the key points discussed by Jennifer Deroin and Bob Kemble during a recent speech they made at the Prosper Show 2018.
Earlier this year, the team at Prosper Show hosted a successful conference for Amazon FBA sellers looking to keep up to date with all that’s been happening in the world of online retail. Michael J. Fleming of Sales Tax and More, in particular, demonstrated an impressive grasp of the ever-changing sales tax laws in North America. He spoke about Nexus, what it means and how it can affect US sellers on an individual basis.
This article takes a closer look at some of the core concepts and points raised by Michael during his speech. The original video can be found here.
As the name implies, Nexus is a financial or physical link to a place (or in this case, state) that can determine whether you are liable to pay taxes for selling in that state. This can become confusing due to the fact that different states have varying laws regarding this issue.
However, if you are audited by the state and found to be misinterpreting tax laws (even unintentionally), you can be hit with significant penalties and a large amount of back tax. While Fleming makes it clear that incarceration is not a common consequence for this crime, the financial fallout can be severe enough to warrant concern for many FBA sellers.
“We’re in a different world this year, than we were this time last year. States were finding people but it was a very labour-intensive way that the states were finding you. They were still finding you, but it was pretty hard for them.”
Source (27 mins).
Fleming also predicts that it will not get any easier to comply with these rules. In fact, he suggests that there has been an increase in auditing in the last year or so due to different states suing Amazon for access to their sellers lists. This happened in Massachusetts in 2017. So while auditing used to be labour intensive, auditors now have easy access to information. This makes an audit more likely for an Amazon business.
Am I Liable for Nexus?
Whether or not you are liable for Nexus depends on a number of factors. Fleming emphasizes that it can vary between states and business sizes. He compiled a list of the most common activities undertaken by FBA businesses that create Nexus in a state:
Ownership of real property in the state.
Ownership of personal property in the state.
Leasing of real property in the state.
Leasing of personal property in the state.
Maintaining of an inventory in the state.
Travel of employees into the state to conduct business (sales, training, deliveries etc).
Use of independent sales or manufacturer’s reps in the state.
Use of sub-contractors for repairs, maintenance or installations in the state.
Delivery of property in seller owned vehicles in the state.
Allowing employees to telecommunicate or use home office in the state.
In this case, real property takes the form of things like warehouses, offices or stores, whereas personal property refers to assets like machinery and equipment.
Ultimately though, Fleming boils these factors down into three main concerns for a business: Where do you live/conduct business? Where do you have inventory? Where does Amazon act as your agent? If you have a connection to the state through any of these, it is likely that you have Nexus and should register to pay sales tax in that state.
Is it Worth Getting Registered?
“For Coca-Cola, $100,000 is like a rounding error, it’s not very material to them. For me, $100,000 is a whole lot of money. So for each of you out there, what’s material to you is going to be different.”
Source: (22 mins).
While following tax laws to the letter will cover you in terms of penalties, it may not be the most profitable thing for your business. Getting registered in every State in America is expensive for a business, so it pays to be smart about when and where you decide to register. Fleming makes a point of discussing how and when it can be worth getting registered in a state. He sums it up in five factors.
“I can tell you what’s not material. I can’t make the math work in any state where your annual sales are going to be less than $3,000. The math just doesn’t make sense to me.”
Source (23 mins).
If sales volumes are low, it may not be worth getting registered at all and simply risking the fallout should you get audited. If the overall sales volume is below $3,000 in any given state, the consequences for not obeying tax laws can be less damaging to your business than the cost of complying.
“Things are going to be taxed differently from state to state.”
Source (24 mins).
Whether a product is taxable or not can depend on the type of product sold. Most FBA sellers deal in Tangible Personal Property (TPP), which is taxed in most states. However, Fleming gives some examples of minor exemptions that often occur in state tax. Some states exempt clothing items, and some exempt dietary supplements. These exemptions are common, so often it pays to learn whether or not your product is taxable in that state before proceeding to get registered.
“If you can’t sleep at night, if this is keeping you up, and it does keep up a number of sellers, maybe that $3,000 number is yours.”
Source (25 mins).
At this point during the speech, Fleming put the effect that sales tax issues have on the regular seller into perspective. He recommends that if you find yourself constantly worried about being audited, getting registered in states where you make even a small profit margin can be the correct decision to make. At the end of the day, as a business owner you must do what feels most comfortable for you.
“If you’re putting money aside just in case the state does find you, then you can have a higher risk tolerance”
Source (25 mins).
This factor is fairly self-explanatory. If you have accumulated a healthy fund for protection in case of an unfavourable audit, then you have more agency to opt out of getting registered. The more money you have set aside, the higher your risk tolerance will be. However, for many businesses, the profits earned go right back into the business and become tied up in inventory. This scenario would lower your potential risk tolerance, as there would be very little funds available to pay fines if you are audited.
“If you have a 2% profit margin, I’m thinking you absolutely need to have that $3,000 margin.”
Source (26 mins).
The higher your profit margin for each product, the higher your risk tolerance can reasonably be set at. For instance, if you get audited and are found to owe the State tax, the fines will not likely bankrupt your business. However, if your profit margin is small, going out of business is a real possibility.
What Are My Options?
“The state says that you should do it but to me, just because the state says you should do something doesn’t mean it makes good business sense.”
Source (23 mins).
Fleming covers a number of potential actions to take in light of these fluctuating nexus laws. The first of which is to just do nothing. As we discussed, if your sales volume is low enough in a particular state, it might not warrant getting registered at all. Ultimately, taking this course of action depends upon how an audit would harm your business.
Another option could be just to concede defeat and get registered to pay the tax in every applicable state. This is often the option that FBA sellers take, as it avoids what Fleming calls “the greatest tragedy in sales tax”. He explains that this ‘tragedy’ happens when the customers could have been paying the tax the whole time through each transaction.
Because the seller did not register for sales tax, they couldn’t collect said taxes from their customers. When they get audited, the penalties and back tax end up getting paid off out of their own profits - instead of customers paying for it.
Fleming discusses amnesty as an option for those who know that they already owe sales tax. However, he made a point of recommending that nobody in the audience take this route. He reasons that while Massachusetts used to have a true amnesty that waived all penalties and back tax, state amnesties these days exclude the back tax - so you still end up owing a great deal of money.
Voluntary disclosure seems to be the path of least resistance when it comes to owing money in tax. You have the advantage of coming forward yourself, which will allow you to avoid hefty penalties. However, Fleming warns that you should still be prepared to owe a great deal of money to the state. This is a fairly expensive option.
Finally, there is the option of closing your business and reopening again as a new entity. Fleming argues that this is not a real option at all, but rather a disaster waiting to happen. Even if you reopen as a new business, if the states find you, then all your back tax returns will be due, plus penalties with interest applied. Overall, this option is fairly unviable.
So What Happens Now?
“The future looks a little bit bleak and I don’t think the feds are going to give us any cover whatsoever.”
Source (36 mins)
Ultimately, Fleming’s conclusion was that this problem is going to get worse before it gets better. States are continually fighting to have their tax laws recognized by Amazon sellers, and as with Massachusetts this year, they seem to be making progress.
However, that is not to say there is one right option for any business. There are many potential solutions and the viability of each of them depends on the specific needs of your business. The main message to take away is to be prepared, and have a plan for how your business will weather the storm.
Michael J. Fleming can be contacted here for further discussion or detailed advice on US sales tax.
Want to learn more about how you can manage sales tax liabilities?
We have put together a 6 day email crash course that covers everything you need to know about sales tax for Amazon FBA sellers (in the United States). It takes a look at the most common strategies for managing your obligations, and tools that can simplify the process of calculating, collecting and remitting sales tax.
When you join Amazon as a seller, you get access to a world-renowned platform which drives over US$110B worth of sales (and these are just marketplace transactions!) every year. That said, competition on Amazon is stiff: approximately 2,975 sellers join Amazon every single day; regardless of which industry you’re in, chances are that there are plenty of other sellers fighting for a slice of the pie.
So, here’s the question: how do you stay relevant in such a fast-paced, competitive environment? The answer lies in constantly reinventing your business, and not being complacent. In this article, we explore 5 different strategies that you can use to take your Amazon seller business to the next level.
1. Move on from dropshipping.
Many sellers make their first foray into the world of Amazon with dropshipping. With this business model, you’re listing items for sale without actually having these items in your possession. Once a customer buys an item from you, you go to your supplier’s website, key in the order details, and have your supplier send the item directly to your customer.
Now, the beauty of dropshipping is that you don’t need to hold any inventory; this lets you set up shop with virtually zero upfront costs. That said, there are disadvantages to dropshipping as well, with one of the key disadvantages being that you’re dealing primarily with low margin goods. When it comes to dropshipping, you generally need to process a large amount of transactions to turn a decent profit.
If you’ve used dropshipping to get your foot in the door, so be it, but if you’re serious about growing your Amazon seller business, experts recommend moving to other business models. One possible option is to experiment with buying and reselling branded products. Ray Berman, who has been selling on Amazon and coaching Amazon sellers for 8 years and counting, says that he immediately skyrocketed his Amazon sales to $600,000 per month (up from $25,000 per month) after venturing into dealing in branded goods.
2. Come up with a private label.
If you’re not keen on reselling branded goods, another option is to come up with a private label, and build your own product line. There are plenty of manufacturers that will white label an existing product for you, and while you’ll still have to do your due diligence to make sure that the product works well and is of good quality, creating your own label isn’t quite as difficult as you might think.
Why create your own label? Owning your own label gives you more control when it comes to branding and pricing, and it makes you less vulnerable to market fluctuations and price wars. Ideally speaking, you should go a step further and invest in R&D and intellectual property as well. If you create your own technology and patent your products, for example, this makes your business more defensible. In other words: you’ll be able to protect your business more effectively against unethical sellers who might try and rip you off.
3. Don’t restrict yourself to FBA
On paper, FBA sounds like it makes a ton of sense. You can focus on developing your products and growing your sales, and Amazon will take care of the rest (picking and packing, distribution, etc) for you. That said, between the storage fees and fulfillment fees that you’ll have to cough up, using FBA probably isn’t the most cost-effective option for you.
Does this mean you should abandon FBA completely? Not necessarily - FBA does come with other perks as well, so we wouldn’t write it off so quickly. More specifically: any products you list on FBA are automatically eligible for free shipping and free Two-Day Shipping, and this makes your products more attractive to consumers (as opposed to products that don’t come with free shipping).
The bottom line? If FBA brings you enough (additional!) sales to justify its cost, then use it by all means. But for your customers who don’t care about free shipping, maintain your own inventory and ship out your own orders - you’ll get a much higher margin out of these transactions.
4. Expand your team.
Most sellers start off their Amazon business as a one-man-show, and that’s perfectly fine. When you find yourself struggling to cope, and your business has plateaued, however, that’s an indication that you need to expand your team.
Who should your first hire be? This really depends on your exact situation and your current challenges. The most obvious thing to do is to hire people to take the menial, low-level work off your hands (eg shipping and fulfillment), but some entrepreneurs find that it makes sense to hire people to take on highly specific functions (for instance: managing negative reviews) as well. Sit down and think about what will impact your bottom line the most, and work from there.
5. Outsource if necessary.
If you’re worried about cash flow, and you don’t want to bring a full-time hire on board, you can always work with freelancers and contractors, and outsource your work that way. For example, many Amazon sellers don’t want to be bogged down with bookkeeping and filing their taxes (plus: they don’t have the expertise required to get their accounting done efficiently) - and that’s where Museminded comes in handy.
Accounting aside, it’s also common for Amazon sellers to outsource the running and managing of their Sponsored Products to external contractors. Assuming you have over a hundred SKUs, you’ll probably be running many campaigns, and testing out hundreds or even thousands of keywords at the same time. For the average Amazon seller, it takes a great deal of time, effort and expertise to optimize your campaigns - but for someone who specializes in running Sponsored Products, it’ll be a piece of cake.
A final word on reinventing your Amazon business
Remember: 2,975 sellers join Amazon every single day; if you’re not careful, these sellers will win over your customers and steal your business. In order to ensure that your Amazon business survives (and thrives), make sure that you’re constantly improving upon your operations and workflow, and never get complacent.
Avenues to the marketplace come in many forms - be it bricks and mortar retail, dropshipping, affiliates or selling online and using FBA for fulfilment.
Each and every route to market comes with its own set of advantages and disadvantage, opportunities, threats, strengths and weaknesses.
This post looks at the benefits of selling on Amazon and using FBA (Fulfilment by Amazon) as a service to store, pack and deliver your products to consumers.
Tap into vast economies of scale
Amazon offers one of the most advanced fulfilment networks in the world through their FBA services. The FBA network of warehouses includes facilities in 25+ States in the USA alone - providing storage, packing, shipping and 24/7 customer service.
Amazon also offers the ability to increase your turnover internationally via 13 marketplaces, 175+ fulfilment centres and a loyal customer base in 180+ countries. They will handle the complexities of international selling and logistics on your behalf.
Some key benefits of FBA are as follows:
Faster fulfillment and shipping.
Ability to build a solid customer base faster.
Higher conversion rate.
Handling of customer service and returns.
Ability to use plugins such as accounting and sales tax apps to automate away much of the workload and ensure smooth and time saving administration.
For FBA to make financial sense for your business, it will largely depend on how you have your organisation geared to take advantage of the benefits that FBA has to offer. It will also depend on what you sell and how you sell it. Typical products that can do well using FBA include:
Items with high demand during peak periods like the final quarter of the year.
Items with a predictable demand.
Faster fulfilment and shipping
Same day shipping / delivery and free shipping are two services that FBA can offer. Ask yourself if that is that going to be a benefit to your business and can you offer this yourself with your current resources?
According to research data presented by Flexe.com, 56% of respondents surveyed, said that offering 1-2 day shipping is essential for business. Only 44% rated free shipping in the same regard.
Nonetheless, these two services have now become essential ingredients for becoming a successful online seller.
When you become an Amazon Prime Seller, you have the opportunity to win a ‘buy box’. In doing so, this will rank you ahead of your competition and increase your chances of gaining more sales. Here is an interesting article about winning a buy box.
Lower costs may be a benefit to a business adopting the FBA approach to selling online. This often depends on the physical size of the items you are selling and the frequency at which they sell. By outsourcing your storage and logistics to Amazon, you are effectively trading fixed overheads (rent, rates, insurance, staff etc.) for variable costs. This allows you to scale up or down to meet both business growth trends and seasonal demand without needing to worry about reaching capacity limits.
To make an informed decision about costs versus performance you would need to weigh up your current and expected costs to achieve growth, against the cost structures of FBA.
If you are planning on growing your business using ‘seller fulfilment’ of orders as opposed to FBA, then you need to consider the cost of expansion. This may involve employing more staff, more warehouse space, rental guarantees and more administration overheads.
When you are renting facilities, you need to maximize the usage of your warehouse space and keep staff busy to get the best efficiency from your overheads. With FBA, you only pay for what you use, and are able to tap into some of the most efficient warehousing systems in the world. It also allows you to eliminate many of the unknown costs associated with moderate to rapid expansion.
For a full list of the current FBA service fees, click here. In addition to these fees you also need to allow for ‘referral fees’.
Amazon brings customers to you
Referral fees are charged by Amazon when you sell a product through their platform. It is a form of commission for bringing the client to you. No different from selling a house through an estate agent. The fee is a percentage of the total sales price and generally ranges from 6%-15%.
Amazon uses a portion of these fees to fund their affiliate program. People online that have a social following such as bloggers and influencers are able to provide links back to products being sold on Amazon. When some follows the link and makes a purchase, the affiliate receives a commission - which can be up to 10% of the sale price!
By providing incentives in this way, Amazon is able to drive an enormous amount of web traffic to their platform. This benefits sellers by providing added exposure to customers around the world
Customer service and returns
Training customer service staff and having them on hand 24/7 to look after disgruntled clients and deal with returns of unwanted or damaged products can be very costly to a business. And let’s be honest it’s not the most enjoyable function to deal with when running a business.
These services are provided free of charge when you become an FBA seller, with the exception of the costs of actual returns and disposal of products. Click here to learn more about FBA customer services and returns.
Stock management and product performance
Having the right stock in the right place at the right time is the key to attaining excellent ROIs. With FBA, they ensure you are constantly working towards achieving this through tracking various key performance indicators, which form part of their IPI (Inventory Performance Index).
Basically if a product is not moving they ensure you get it moving with all sorts of prompts. Through what is known as an Inventory Performance Dashboard, you can assess and implement procedures to ensure slow moving items and aged stock are automatically marked down to compete with lowest priced competitors, and reorder levels are in line with sales trends.
Amazon also dynamically moves inventory around their network of warehouses to bring it closer to customers. This helps to reduce delivery timeframes, keeping customers happy in the process
Ability to integrate third-party apps to ensure smooth and time saving administration:
Amazon’s Seller Central platform provides an extremely large amount of sales and inventory information. To ensure that your business is making the most of this data, there are many add on tools that you can subscribe to. These tools link to your Seller Central account to ensure the data available is being analysed and used in such a way to save you money and time on tasks such as accounts and sales tax responsibilities.
A2X for example, can be used to automatically input all of the relevant Amazon sales information into your Xero or QuickBooks cloud accounting system. Amazon settles seller accounts once every fortnight, paying any income from sales - less fees. Quite often, sellers forget to take fees into account, and simply record the net amounts received as revenue in their books. This results in large inaccuracies, which A2X helps to solve.
By allowing third-party developers to build apps around the Amazon platform, they are able to create an ecosystem of support services tailored to the needs of Amazon FBA businesses. Not only does this improve the seller experience, but it also helps to reduce and remove any shortcomings that Amazon may have by providing incentives in the way of business opportunities.
Amazon is the place to be - FBA makes it easy to get you there
Amazon is the largest western online marketplace, and represents a juggernaut in the eCommerce space. Through bringing a diverse range of sellers and buyers together, Amazon effectively provides value to customers by creating extreme levels of competition that help to keep prices down. For merchants, this means a growing audience of people who are ready to spend money.
Amazon recently launched FBA in Australia, indicating that they have no plans of slowing down any time soon. Many of the early FBA sellers have made fortunes by being first in at the ground floor, and building a solid reputation on the platform. Whilst FBA is far from a juvenile business, it certainly hasn’t matured just yet, and there is definitely room for new entrants.
If you like the idea of being able to run your business from anywhere in the world, and having the ability to scale up without taking on large amounts of new overheads, then perhaps FBA might be a good fit for you. Click here to find out more about where and how to sign up for FBA.
To set the stage for everyone, “sales channel” is a generic term that refers to anyway to sell products on the internet. Channels break down into two very large categories - Marketplaces and Shopping Carts. Examples of marketplaces include Amazon, eBay, Walmart.com, Jet, and other places where sellers virtually assemble in one place to compete for customers. Shopping carts are curated experiences where the customer is buying from a single seller and might include custom websites, Shopify, BigCommerce, Magento, WooCommerce, or others.
Know where you’re starting
Just over half of all online sellers start by selling on Amazon. Amazon is the largest (and most powerful) marketplace, where entire fortunes have been won and lost with Amazon’s focus on the customer. As I like to say:
“Amazon giveth, and Amazon taketh away.”
Amazon has built the infrastructure in such a way that they win in all scenarios, and that’s a double-edged sword for sellers. You can start a new product line tomorrow and see nearly-instant success, all because Amazon’s algorithms get your product in front of the best customers right away. Similarly, a moment’s lapse in attention can shut down your best selling products and leave you with nothing.
Here’s the point - you’ve had to learn the Amazon rules, and you’ve done it well. Amazon has helped you by giving you tools you could only dream of getting on your own. Amazon has cut out a lot of the ugly parts of selling products. Yet, they’ve also introduced some funny rules that don’t apply anywhere else. Your task now is to take this learning and translate it to new platforms, from the right way to post a listing, all the way to managing a complex inventory network.
Avoid “the Shotgun Approach”
Many sellers who contemplate an omnichannel approach will say, “Hey, if I’m adding all this infrastructure, I might as well go big!”
To this, I say, “Absolutely - in due time!”
The key here is that many sellers equate “go big” with “sell everywhere”, and that is no guarantee for success. Each channel has pros and cons, and most channels won’t be worth the headache they induce for the sales that they generate.
A few rules-of-thumb I advocate:
Talk to your accountant. You should be telling your accountant about any sales channels moves MONTHS ahead of starting. They need to be ready to help with the new payment processors, new fee structures, and new access issues.
Plan it like a project, and start with 8-12 months. If you’re planning on going to a new sales channel, you need to be willing to invest 8-12 months of resources into seeing how it works out. This also prevents you from testing 15 new channels starting tomorrow!
Get a pro to help. There are secrets to each and every channel, and you need someone with deep experience. Hiring a consultant or channel expert can short-cut your learning curve and reduce project time by half or more!
Those with deep experience don’t sound like snake-oil salespersons, or the “Buy my course and everything will MAGICALLY work overnight!” people. They have real, relatable experiences and can talk even-handedly about pros and cons. Real pros are also hard-to-find and may not be cheap.
The Devil is in the Technology
As with every experience in entrepreneurship, the key to success is knowledge. Here are some questions to dive in on, or get help with:
What is my budget for tackling technology changes? We could talk all day about how lovely it would be to add 5 sales channels, but the budget will determine how much we can move the needle. Consider technology costs, as well as upfront expenses of training or education resources. Know your total spend allowance, as well as your additional monthly expenditure limits.
How does this change my SEO? Search Engine Optimization (SEO) for Amazon is a completely different ballgame than SEO for your brand-new Shopify-hosted website.
How does this change my SEM? Search Engine Marketing (SEM) is all about online ads. Going to eBay may or may not be something that you can work into your current SEM strategy. If you add your own website to the mix, do you know how to target your ads well enough to separate your Amazon targets from your website targets?
How does this change your fulfillment network? Does a 3PL make sense, or do you need a bigger warehouse? Do you simply need an additional warehouse?
Will you need new or different payment processors? Shopify will force you to use their payment processor, but BigCommerce won’t.
How does this change your other technology? Are you ready to learn all about EDI for Home Depot? Do you need an omnichannel inventory management software? Will you need other things, like scanners or a POS system?
START WITH WHY
Let’s make this simple and start with the answer to the question “Why does your business exist?”
First and foremost, it’s to add value
Secondly, it’s to make money
Most people read this and instantly call me crazy. Some dismiss it as “a Millennial thing”, or a difference of opinion. All of these are arguments I’ve heard, and some arguments have merit here, until you use a different vocabulary. Let’s rephrase.
Your business first exists as to facilitate a vision.
Your business, when run well, should make you a profit that supports the vision.
This formulation is much more in-line with people much smarter than myself. One of the first big shifts in thinking started at least as far back as Michael Gerber in the 1986 book The E-Myth (which he revised multiple times for specific verticals too!). Twenty-five years later, Chuck Blakeman was still tweaking the same core concepts in a book literally titled Making Money is Killing Your Business.
These books really start with the big question - Why would you even bother to start a business? Certainly, it’s not just about making money, because if all you wanted was to make money, there is no reason to start a business. 50% of business fail in the first 5 years where there is no profit to be had, and ultimately only 1%-10% ever succeed at all (% depends on your sources). Clearly, a 1 in 100 shot at success means that it’s more than just the money. Why bother risking anything when you can just work for someone and have a nearly-guaranteed income?
At this point in the conversation, other well-read people will throw other book titles out. “Yeah, but what about Profit First by Mike Michalowicz? That title is all about the money!” Yes, yes it is, but if you actually read what the author is getting at, it’s about how to structure your business internally so that you can actually reach your vision. He talks about his system like this:
“Without [the Profit First mindset], we get stuck in trying to sell our way out of the struggles. Sell more. Sell Faster. Get the money anyways you can. It is a trap - a dangerous trap that would even have Frankenstein’s monster poopin’ his panties.”
And now, that sure sounds a whole lot like Making Money is Killing Your Business, right?
GETTING BACK TO BASICS
Fine, let’s get down to brass tacks here. You need a vision, and a vision is more than just a goal. Vision is a set of carefully cultivated goals that align to bring about a much larger vision. A vision might be:
Personally, I want to be able to afford a home in a major metropolitan city, stay married to my until I die, and help as many people achieve their own goals as I can.
For the business, I want to position my business to be the niche expert in health products, build an app that people find irreplaceable, and support a well-orchestrated team of remote workers.
Notice how there’s only one or two statement that directly involve money here? Buying a home. Building an app. Yes, money is important in being able to support a team or convince my partner that I’m worth staying around for, but that’s secondary.
From here, I want to divert from discussion goals and keep it simple. I want to you think about your vision. Your vision is not “grow revenue by 15% this year” - that’s a goal. Your vision needs to address why you wake up, why you sweat, or why you risk anything at all.
Only once you’ve done this can you really understand what your business is supposed to be. Depending on your personal vision and the vision for your ecommerce company, an Amazon store might be all you ever need. Or, you might need Amazon, Shopify, and eBay, but it will depend solely on what your vision is. Here’s what I do know - those that focus only on “how many sales channels do I have, and what is my revenue?” miss the bigger answers to the bigger questions. They end up trapped in their business, selling lots of stuff and feeling more trapped each day. They hit their revenue targets, and go home to cry each night. They fail to enjoy life at the end of the day, and that’s what I’m here to fight against.
The first step is finding your vision. What is yours?
Amazon is an amazing vehicle for bringing your products to market. However, for varying reasons, the time may come when you no longer wish to continue trading on this platform. In this article we cover the options that you have available, as well as the key points you should consider before proceeding with the step by step process of closing your Amazon seller account.
Things to consider before closing your account
Once your seller account has been permanently closed, you will no longer have access to the following benefits:
You won't be able to access other websites using your Amazon.com log-in, such as Audible and Amazon accounts in other markets.
You won't have access to digital content related to Amazon Music, Amazon Drive and Prime Photos, or your Amazon App Store purchases.
Your customer profile will be removed and inaccessible. This includes any reviews, discussion posts and images that customers have uploaded.
You won't have access to your account history (including credit card information, order history, etc.). It is also important to note that once your account is closed, you can no longer process returns, issue refunds, respond to A-to-Z Guarantee claims, or communicate with buyers.
Returns and refunds can't be processed for orders on closed accounts (including textbook rentals).
If you have a remaining Amazon.com Gift Card or promotional credit balance, these funds will be inaccessible.
If you have a North America Unified Account and you close your seller account, all of your other eligible accounts will be shut down at the same time. For example, if you close your U.S. account, your Canada and Mexico accounts will also be closed.
If there is any information (for example, transaction records and financial data) that you need to keep, it is critical that you take a record of this before proceeding with closing your account.
Aside from permanently deleting your account, there are other actions that you can take, depending on the reason why you are considering closing your account.
Other options you have available:
If you want to avoid paying monthly selling fees, you can downgrade your account from a professional selling plan to an individual selling plan. Rather than paying $39.99/month as a subscription fee, you simply pay a $0.99 fee for every item sold (plus additional charges). This is suitable if you are selling less than 40 units per month. To learn more, see selling plans.
If you do this, you will continue to receive customer emails. However, you will still need to attend to your performance metrics. To put your account on vacation mode:
Go to Seller Central, navigate to Settings > Account info.
Under Vacation Settings, choose Inactive > Submit.
When you are ready to resume trading, you can set your account status back to active.
Close down listings:
If circumstances related to sourcing inventory change, such as product supply issues from your manufacturer or international shipping disruptions, then you may wish to consider this option. To close down listings, follow these steps:
Go to Inventory in Seller Central.
Select the item(s) that you want to stop listing.
From the Action menu, click Close Listings.
It can take up to 36 hours for all of your listings to be removed from the Amazon marketplace.
Deleting some product listings:
If you have products that you can no longer source or you wish to make a permanent change to a specific title, then this option may suit you. Please note that such changes are permanent and irreversible. To permanently delete product listings, you need to:
Go to Inventory in Seller Central and select the items that you wish to edit.
Click on the Delete Product and Listing option from the drop down Edit menu.
Process for permanently closing your seller account:
If the above options are not relevant to you, and you wish to proceed with a permanent closure of your seller account, you need to take the following actions:
Process all outstanding orders.
Wait 90 days after processing your final order to ensure that your A-Z Guarantee Claims period is satisfied.
Wait until you have a nil balance in your account.
Resolve all buyer transactions including refunds.
Confirm that Amazon has your current bank account details on file so that you can receive your final payment.
If you have any remaining FBA inventory, you must submit a request to either return or dispose of it prior to closing your account. For more information, see remove inventory (overview).
Once you have completed the above checklist, go to the contact us page.
Click Close your account.
Fill out the form and click Submit request.
Once Amazon has received and processed your request, they will either send you a confirmation email that your account has been closed, or send you an email detailing why your account can't be closed at this time and actions that you need to take in order to successfully close your account. This tutorial provides helpful illustrations for filling out the ‘close your account’ form.
Have you considered selling your Amazon business?
Another option available to sellers, which people don’t always think about is selling your Amazon business.
Get in touch with us at MuseMinded for options on How to Sell your Amazon Business.
If you’re looking to grow your Amazon business, chances are you are looking for a scalable financing solution. After all, you need to continue to buy and fill inventory in order to make every sale you can possibly make, avoid stockouts and crush the competition. As you may already know, a stockout can be detrimental to your Amazon business. Not only will you lose sales today, but your ranking within Amazon will drop causing you to lose future sales as well even after you’ve restocked your inventory. Therefore, sellers looking to reach their full online selling potential need an Amazon financing option that’s consistent and fast.
While inventory financing on Amazon and other ecommerce platforms is enough to overwhelm even the most seasoned online sellers, chances are you have more options than you think. Here we explore the ins and outs of popular inventory financing options so you can get a better idea of which works best for you and your business.
Entrepreneurs have long financed their businesses using good old fashion savings. After all, it’s readily available with no interest, applications, credit checks or wait time. While it may be a good idea to use your savings to finance all or part of your initial inventory or to refresh inventory from time to time, this may not be the most sustainable option for your business. Once your savings is gone, it could take a while to replenish it. You also could be putting your personal finances at risk because if an unexpected business or personal expense comes up, you may not have the cash on hand to cover it.
Credit cards are a familiar and convenient inventory financing option. Chances are you already have them and they come with tempting cash back and travel rewards offers. They are also interest-free if you pay them off on time. However, if you are unable to pay them off on time like you’d originally planned, you may end up paying interest. Also, platforms such as Amazon have essentially created unlimited demand among consumers, however, credit cards still have limits. So your credit card limit may not be high enough to cover all of the inventory you can possibly sell. Like with stockouts, this can result in missed sales.
Traditional loans offer low interest rates and long payment terms. However, approval rates for small businesses are low. So they can be difficult for marketplace sellers to get. Alternative loans tend to have better approval rates, but the payment terms are short and the interest is high. Like credit cards, loans may not be enough to cover all of the inventory you need, especially if you have a hot product or want to take advantage of seasonality.
If you qualify for an Amazon Loan, you may find an offer in your Seller Central dashboard. It is a one time offer with an expiration date. You can’t apply directly for an Amazon loan. But, if you qualify, they will contact you directly with a binding offer. Repayments will be debited directly from your Amazon payouts so paying it back is easy and convenient.
Payability is a financing company that provides Amazon and marketplace sellers with daily cash flow and capital advances. Their two products: Instant Access and Instant Advance were designed specifically for the needs of marketplace sellers.
Instead of waiting 14+ days, Amazon sellers can sign up for Instant Access and get their Amazon payments every business day. Here’s how it works: Each day Payability will advance you 80% of your Amazon payout based on the previous day’s sales. The remaining 20% stays in a reserve to cover returns and chargebacks and is released to the seller on Amazon’s regular payment schedule for a 1-2% fee on gross sales. With steady cash flow you can consistently fill inventory, grow your business and avoid the dreaded stockout.
An Instant Advance is a purchase of future marketplace receivables. Using your account analytics, Payability will predict what your sales will be in the next 3-4 weeks and advance you that money now. With this influx of cash, you can launch new products, take advantage of seasonality and other big growth opportunities. The cost is 1% a week. The total costs depends on how long it takes Payability to obtain all of the receivables purchased. This usually takes 16-20 weeks. But, the earlier they receive the full amount the less you will pay in fees. See just how it works in this short video.
Approval for Payability is based on Amazon account health rather than credit so there are no credit pulls or dings to your credit. So your access to capital is based on how much you can sell rather than how much you can borrow. Both Instant Advance and Instant Access work well separately or in conjunction with each other, Amazon Lending and/or other forms of financing.
In the modern world of eCommerce, more customers are at our fingertips than ever before, supply chains are ripe for disruption, and there are many tools available to help entrepreneurs effectively deliver value and operate successful businesses. Over the past 20 years, a large proportion of retail trade has shifted from physical storefronts in every town and city to online shops and powerful eCommerce platforms such as Amazon that connect consumers and suppliers throughout the world.
All kinds of businesses now have the ability to reach customers on a scale that was previously reserved for only the largest companies with abundant resources at their disposal. Now, almost anyone can sell their products on Amazon, source supply from millions of factories around the the world, or even dropship an ever expanding range of goods.
There has never been a better time to build an eCommerce business. With an ever expanding range of tools available, businesses can grow faster than ever before without the proportional growth in workload.
Automating and outsourcing tasks and functions wherever possible is the key to creating an online business that can scale. Automating business functions removes yourself from the driver’s seat, creates a predominantly self-managing asset, makes your business much more attractive to potential buyers and frees up your time for the more important things in work and life.
In our “how to sell your Amazon FBA business” eBook, we explore a few of these effective tools, and how digital entrepreneurs can use them to maximize the business valuation, minimize workload, and make the business easier to sell.
Let’s take a deeper look…
Contract out product inspection, packaging and labelling to prep warehouses:
Most Amazon businesses take advantage of Fulfillment by Amazon (FBA) or other third party logistics (3PL) providers to look after warehousing and fulfillment of orders. If you aren’t already contracting out warehousing and fulfillment to FBA or another 3PL provider, we highly recommend looking further into this option, as it practically eliminates the need to physically handle stock.
When you order product from suppliers, it is important to have checks and balances in place to ensure that faulty and damaged stock is rejected, items are branded and packaged correctly, and that labels for warehousing/fulfillment purposes are correctly attached so that your goods can enter and exit fulfillment warehouses without a hitch. This is where prep warehouses such as FBA Inspection come in handy - providing vital services and peace of mind, and ensuring that only first grade products are sent out to customers.
Take advantage of automated accounting software such as A2X and Taxjar:
Not only does automating record keeping remove an obscene amount of unnecessary work, but it also improves the integrity of your accounts. By eliminating the possibility for human error, potential buyers, and also auditors can have confidence in the accuracy of your financial information.
At the end of the financial year, your accountant will be delighted to receive a tidy set of books, which will also likely reduce your compliance costs.
For busy periods, and cash strapped startups, consider using cashflow services such as Payability:
Payability is a software integration that plugs directly into your seller central account, and provides next-day cash advances on sales through FBA. Amazon pays sellers once every fortnight - this presents a challenge for companies that are growing at a very fast rate, cash strapped startups, and FBA businesses struggling with maintaining stock levels during the busy season.
By receiving income almost immediately, sellers are able to keep stock levels up, pay suppliers and creditors on time, and remain in the “buy box”.
Use automated post-sale follow up tools such as Sales Backer to get more reviews:
More positive reviews tends to result in more sales. However, customers often forget to review products after purchase. After a customer makes a purchase from your Amazon storefront, the Sales Backer tool automatically sends them an email politely requesting a product review. This helps sellers to achieve a higher “Best Seller Rank” (BSR). Products with a higher BSR are shown in customer searches before products with a lower BSR.
“Buyers want to purchase an income stream, not a full time job”
Automating and outsourcing the bulk of your business operations increases the value of your Amazon business through reducing workload and making the business more scalable. Our A2X “how to sell your Amazon FBA business” eBook covers a range of topics related to optimizing and selling your Amazon business such as:
How much is my Amazon business worth, and how do I value it properly?
What can you do to increase the value of your Amazon FBA business?
What are the types of buyers of Amazon FBA businesses?
When is the best time to sell your Amazon FBA business?
Ways of selling an Amazon FBA business.
How to properly handle the sale - steps to success.
Practical considerations when selling your Amazon FBA business.
If this sounds like something you might be interested in learning more about, you can get your free copy of the eBook here.