Wednesday, February 14, 2018

Rhode Island Enforcement - Collecting and Remitting Sales Tax is a Bummer

I'm sure many sellers received an email notice yesterday from Amazon informing them that Rhode Island passed a new state law requiring Amazon to disclose seller contact information to the RI Tax Authority if they had any sales in RI in 2017.





Before I say anything, I have to tell you that I am not an accountant or a lawyer or any sort of tax adviser.  If you received this email from Amazon you should have a conversation with a professional.


As far as I can tell, there are a few things to be aware of for Rhode Island specifically but again speak to a professional before deciding what to do.


According to the bill, the requirement to collect and remit sales tax in RI seems only to apply if you have sold $100,000+ or if you have 200+ transactions.

Thankfully, RI is a small state so unless you are a very large seller (or you sell Rhode Island state flags), you are unlikely to have more than 200 sales in RI.

You can see a summary of it here.

Update: After reading the bill more carefully it seems that you only have a requirement of notification and reports if you are not collecting sales tax and you are over the 200 transaction or $100,000 revenue threshold.


That being said, it seems that if you sold $100 worth of items to any customers in RI during 2017, RI requires you to send notices in the mail to those customers explaining that they have a requirement to pay sales tax on their own.  You can read about that here.  I'm sure customers will love getting that in the mail.

Normally, small sellers might think they don't need to comply because the cost of states going after small sellers wouldn't be worth the payoff.  That being said, the penalties here can be pretty severe.  If you don't comply with these requirements, there is a penalty of $10 per incident with a minimum of a $10,000 penalty.  Therefore, I would take these notices seriously.


Other States

Recently, other sellers have received a similar email from Amazon about the state of Massachusetts.

There may be a similar requirement in Louisiana, Colorado and Vermont.

Also, Amazon started collecting and remitting sales tax for all sales, including 3rd party sales, in Washington State starting this year.

You can be sure that if states can get more sales tax money, they will begin to write laws requiring Amazon sellers to pay.  This is definitely a sign of things to come.

Compliance to collect and remit sales tax is a pain if you aren't already set up in that state.  It takes time to sign up with each tax authority, calculate sales tax collected each month/quarter and remit each month/quarter.

The implementation by Amazon to collect sales tax in Washington State was done very well.  3rd party sellers didn't have to make any changes, sign up for anything, make calculations.  It was all done by Amazon who was already collecting sales tax for their own sales in Washington State.  I don't mind collecting and remitting sales tax per se, it is the time involved that's the frustrating part.  If Amazon began collecting and remitting sales tax on my behalf in all states, I would be in favor.  For now, we'll see how this shakes out.

Tax Jar may have a lot of money coming its way in the future.  You can read more about it in this NY Times article.





Monday, February 5, 2018

FBA Fulfillment Fee Increases Starting Soon Are Painful - Especially for Large Items

A while back Amazon informed sellers that there will be fee increases beginning on February 22nd.  You can access that statement here



Like many sellers, it was hard for me understand how this would exactly affect my business since I can be pretty thick when it comes to math.  I started crunching the numbers now on individual products and I wasn't thrilled with what I saw.

I'm going to go through some random sized products (not items I sell) to show the difference but I encourage you to do the same with your own big sellers to get an idea of how it will affect your business as well.

FBA Selling Fees Explained


Some background information for those who never realized this.  Amazon takes a fee for every item you sell (obviously).  When you sell FBA, this fee is divided into two main categories for simplicity, the commission (usually 15% but category dependent) and the FBA handling fee.  The commission is a percentage of the sale, if you sell for $10, the fee is $1.50.  If you double the price to $20, the fee doubles to $3.  Price is the only factor.  The FBA handling fee is charged independent of the sale price, it is connected to the dimensions of the item which means you pay more for larger items.  If the FBA handling fee is $5, you will pay $5 whether you sell it for $4 or $100.  The total fee is the FBA handling fee plus the percent commission.  (If you sell FBM, you only pay commission not FBA handling fee.)


Therefore, the overall Amazon fee percentage decreases as price increases.  For example, if you sell an item for $10 with a $5 FBA handling fee, you are paying $6.50 to Amazon or 65%.  If you sell the same item for $20, the $5 portion stays the same and the $1.50 increases to $3 for a total of $8 in fees or 40%.  65% to 40% is a big decrease

The increases coming on February 22nd are only on the FBA handling fee, current commissions will remain.

Some Examples

Here are some random examples of increases so that you have an idea.  Go to the Amazon Revenue Calculator to see for yourself.


Let's start with a small item like a watch.  You want to make sure the box is clicked that says "Current and New Amazon Fulfillment" so that you can see the changes side by side.




The important area in the picture is the one that says "Fulfillment by Amazon Fees".  You can see that the fees are currently $3 and are increasing by $0.20 to $3.20.  That's an increase of 6.666667% in FBA fees.


As the items get larger, the increase per unit gets larger as well.  Here is a 10 pack of soap.




This is an increase of $0.52 a unit from $4.64 to $5.16 or 11.2%



Let's take something really large like diapers



The fee increase on this admittedly giant size of diapers is $1.94 per unit!  From $11.18 to $13.12!  A 17% increase!  And it gets larger as the item gets larger.  Some items I sell are increasing fees by $5 a unit!



Ramifications on your Business


It's hard to estimate exactly how this will affect you since it depends on how large the items you sell are.  I'm estimating for myself that my average unit fee will increase somewhere between $0.30-$0.40.   That is huge and I hope I am overestimating.  Take the estimated number you come up with and multiply it by the number of units sold last year.  With that you will give you an estimate of how much more you would have paid in fees last year with the same rates.   If you sold 10,000 units at an increase of $0.35 a units that's $3,500 more in fees.  20,000 units is $7,000 in fees, etc.  Not pretty.  If you sell larger items, you average per unit will be higher.  If you sell smaller items your average per unit will be lower.


However the problem may be more subtle and dastardly since it doesn't account for sales you won't be making.   There are lots of items that I will no longer be interested in selling unless the price goes up as well with the fees.  Here is a quick calculation for you.  For every dollar increase in fees, you need to raise your price by $1.17647 to earn the same amount of money since you have to account for the increased amount of commission (X-.15x = $1.00 or 0.85x = $1).  If the fee increase is $.50, so then the price has to go up by about $0.59 a unit to earn the same amount.  If the price just doesn't go up it may not be worth it to you anymore to sell this item.  You may not be paying increased fees on that item but you are also not earning as much profit as you used to. 




How it Will Affect My Decision Making



1) Bigger is not better!   

Storage fees have been increasing, especially for Q4.  In the same announced Amazon said "FBA inventory storage fees are not changing at this time. We will announce changes to these fees in early 2018."  You can bet that storage fees will increase and the increase will be hefty because they can.

Now fulfillment fees are massively increasing for larger items.  My first order of business is to focus on smaller items which I've been doing anyways and will continue to do.


2)  Increase Prices on many items unfortunately :(

I will likely raise prices on many items to account for the increased fees.  Consumers will feel this for sure.  There are many items that I just can't afford to continue selling with increased fees.  That will likely lead to decreased sales.  A couple of profitable sales are infinitely better than hundreds of sales that are not profitable.  There are other items that I will keep prices the same and just eat the fees since my margins are better.

As mentioned previously, there are other items that I just won't be able to sell since other sellers have better margins and I can't compete with their prices.  It's always been like that and it always will.  It's a game of readjustment.

3)  Opportunities for Larger Items will Present Themselves.

As people increasingly focus on smaller items, some larger items will fly through the cracks.  Opportunities will exist that I hope to exploit but I assume on a smaller scale because of the increased storage and fulfillment when I'm wrong.

4)  Sell some larger items now?

There are some larger items that are increasing $3-$5 in a couple of weeks that haven't been selling well.  Might be time to drop prices $2-$4 and just get out before the fees increase.

5) Readjust Repricers

If you have a repricer you will need to adjust the lower extreme to make sure you don't sell for too little.


6) More FBM?

Fees are only increasing for FBA.  That means the relative advantage of FBA vs. FBM is decreasing and opportunities for FBM and Seller Fulfilled Prime (SFP) will present.



Just think of it as a new long term storage fee you pay regardless of how long the item has been there!  Happy Selling!


So, how will it affect your strategy going forward?

Tuesday, December 5, 2017

A Lot Has Changed in 6 Months...

Massive Life Change

If you used to follow this site, you definitely would have noticed that I haven't posted in a bit more than 6 months and even then posting has been sporadic.

Just a few brief words of explanation.  There was a major upheaval in my life.  I moved out of America.  It's always been a life goal of mine to move to Israel and I was almost successful 2 summers ago.  It didn't happen then but in August I finally did it.  


Moving to another country is hard.  There was a ton of paperwork to fill out and meetings to go to before we left and getting everything set up once we arrived.  Government bureaucracy is not fun, especially when it is in a language that isn't your mother tongue.  Just ask any immigrant to talk about their first month in America and you'll probably get an ear full.  All the while I've been trying to keep the business afloat and successful.  So that's what's been happening and why I've been radio silent.

The fourth quarter can be stressful so I thought this might be a bit cathartic. 




Business from Out of Town is Different


You Aren't There at the Warehouse

Running an Amazon business when you aren't in the country and you aren't in the warehouse consistently is a big challenge.  You need to have perfect records and people you trust there. I rely on email, What'sApp and phone calls to communicate but I won't pretend that it's the same.  It's not.  It's different.




You are very much relying on your worker's paying attention, that they aren't stealing from you, that they notice if something came that was different from what you ordered and aren't just putting it in a box to send to Amazon because that's easier for them.  If there is something in the corner that hasn't been selling, they may not mention it to me but when I was there I would look around and see if there is product that has been unfairly ignored.  You just care more when it is your own business.


Social engineering is very important and for that reason I plan to somewhat regularly (2x a year?) come in, see what's going on at the warehouse, chat with everyone, take the manager to lunch, etc.  It's critical to keep lines of communication open.  They aren't going to keep doing a good job because they like their job, they are going to keep doing a good job because they like the manager, they like me and the manager likes me.


You Aren't There for Buying Either



I can't do retail arbitrage anymore unless I pay someone which I haven't had time to set up.  While I don't particularly like retail arbitrage, I had come to tolerate it.  It's so annoying that the margins tend to be even better.   I don't miss it at all, I mean at all, but the money was good.  Oh well, it's part of the process and until I get a buyer to go to stores for me it's not happening and I'll still live.


It's not just retail arbitrage.  I was close with a few neighbors and we would help each other out.  If there was a quantity limit on an item, I would have them purchase and it would show up at their door.  I'd go pick it up for them and take care of it.  There was almost nothing they had to do, just an order, and even that was highly profitable since they kept the portal bonuses and loyalty points.  I can't do that anymore.  That means that during my upcoming trip I will be moving things back and forth from friend's overflowing basements to the warehouse.  I've tried to pay them more to bring it themselves but they aren't interested.  Again, it's the new normal and something I knew going in.



The Business Has Changed


I'm amazed at how often the types of deals I'm interested in has changed over time.  I used to sell a lot of expensive electronics and I rarely sell them now (Q4 is a bit of an exception since it is easier to find great margins still).

I haven't had nearly as much time in the last six months to research deals as I would have liked but I've been able to keep everything going.  In fact, both sales and profits are up despite my time output being stagnant and many times less than years past and that's for two main reasons:

  • I have focused on replenishables.  I don't have to really think about those other than paying attention if there is a sale on them.  This allows for minimal time output while continually increasing sales as you increase your repertoire of replenishables.

  • I go bigger than I used to.  While I have always had the mantra of "Go Big or Go Home."  I have decided that I need to go even bigger.  If there is a good deal that earns $5 a unit and 60% ROI but I can only buy 2, guess what, I'm not buying it.  Even if I can buy 5-10 I'm probably not buying it.  Every SKU takes time for accounting and logistics and pricing.  It's not worth it for 2 of them.  My standard purchase is about 20-30 and during the fourth quarter my standard purchase is 50-100 to start.  If an item is a replenishable that has gone on sale, I might buy 400-500 if I can.  There are certainly times I get burned but that's happening less and less thankfully.


Move to Self Fulfillment


I have been trying to do more fulfillment on my own.  I'd like to sell more on Walmart which requires self fulfillment, in addition the more that I can sell on my own, the less reliant I am on Amazon in general.  There is also a lot fewer accounting nightmares trying to get all the product back that Amazon has borrowed permanently from me.  Even more critically, it allows you to sell before other sellers can because they are waiting for Amazon to receive their shipments and the eventual race to the bottom.

This hasn't been quite as linear an experience as I would like but I do think I've been making progress.  Often I buy 50 of something I will leave 10 back at the warehouse for self fulfillment and send in the other 40.  That way I can sell off while prices are high and still be in stock until my FBA stock comes in.



This is a picture from shipstation for the last 30 days of all my self fulfillment but it is mostly from the major shopping days and I don't have too many self fulfillment sales outside of those.  As you can see, even in self fulfillment is by far the most.  Of the six I have to ship today, four of them are Amazon FBM.  Two are items that the FBA units are on their way for the first time and 1 is something that sold too fast for me to restock FBA in time so I will sell FBM until I'm in stock. 

At some point this year I would like to move into Seller Fulfilled Prime.  That will likely really ramp up my self fulfillment operations but you have to make sure you have a good system in place and that your team is ready for it..


Goals for 2018


I have not been happy with the inventory channel softwares available currently that aren't $500+ monthly.  My sales on other channels just can't justify that type of expense, though it might get closer if I had one.  My plan is to work with a developer to create my own that suits my needs.  I hope to have that done early in 2018.


Private labeling.  I haven't done it yet but the plans are already in the works.  I am in the testing phase now.  The thought of getting suspended for an Intellectual Property claim on someone else's product scares me a ton.  I would like to have a full line of my own products on Amazon (and maybe my own site?) at some point but I will start with one :)  In order to not spend a ton of money importing a product that I don't know I can sell I am starting to slowly build a listing from scratch and once I have proven I can do it, it will be time to go the overseas route.

I don't expect to write too often in the future but this was kind of nice.  I hope you enjoyed it too :-)

Monday, May 15, 2017

Using Consumer Arbitration with Amazon

Disclaimer:  Arbitration is not for everyone.  It is possible that Amazon may retaliate against those who file arbitration against them.  While easily identifiable retaliation will cause Amazon legal headaches, retaliation can come in more subtle ways that are hard/impossible to prove. For these reasons, arbitration against Amazon for active sellers may be a last case scenario (For example, someone who has been permanently suspended).


A bit of introduction: Alexender Bachuwa is a lawyer who has experience in consumer arbitration.  He writes a column for Frequent Miler called The Fine Print.  While Alex is a lawyer, the following is not legal advice.  Anyone who requires further information can contact Alex at his website.



Overview
As a points enthusiast and travel blogger, I am constantly seeking the most efficient strategies to accrue points. I learned about reselling from this and other blogs and was intrigued. That excitement quickly faded as I realized how much work it takes to be successful in this arena. As readers of this blog know, reselling is often a full-time job that can be both demanding and grueling. It is not for the lazy and it is not for those looking to get rich quick. On the other hand, those successful at mastering the art of reselling can earn a decent living. My appreciation for those engaged in reselling prompted my outrage when I learned of the number of complaints against Amazon, the reseller’s most used marketplace. 

Complaints

The typical complaints against Amazon include the following:

1) Items lost or damaged in shipment to Amazon.  Resellers send in 10 units but Amazon’s accounting only shows 5. Amazon reimburses the reseller only after the seller asks.

2) Items lost or damaged in Amazon fulfillment centers or damaged via carrier. Most of the time will not reimburse you until you ask. 

3) Reimbursements are less than it should be. Sometimes Amazon will give you something standardized for a category, like $25 for an Apple watch.  Other times it is just less than it should be based on current sales price and/or sales history. You usually will get a higher reimbursement if you appeal

4) Accepting returns that violate return policies. It is one thing when Amazon does this with its own money, but it is entirely another to do it when Amazon is taking away from the seller’s money.  For example, accepting returns after 30 days or when there is no UPC is a typical complaint.

Fighting Back

a.    Audit Companies: Many resellers have no choice but to hire audit companies to hold Amazon accountable for its actions. These companies charge steep monthly fees or a percentage of recovery to remedy problems that should not occur in the first place. For sellers facing significant losses, these fees are chalked up as a necessary business expense. It should not come as a surprise that Amazon is looking to ban resellers who employee the service of these firms.


b.    Consumer arbitration: For those that read The Fine Print on Frequent Miler, you know that I am a big proponent of consumer arbitration. Consumer arbitration was invented by powerful corporations in order to put an end to costly class-action lawsuits. For that reason, many consumers have doubts as to the efficacy of the process. Those doubts are misguided. I have successfully filed claims against Citi, Dell, eBay, among others (see Case Results) using consumer arbitration as the mechanism to seek relief.

The Amazon Consumer Arbitration Clause 

Amazon has a consumer arbitration provision that reads as follows:

Any dispute relating in any way to your use of this or any other Amazon Services will be resolved by binding arbitration as described in this “Disputes” section, rather than in court. An arbitrator can award on an individual basis the same damages and relief as a court (including injunctive and declaratory relief or statutory damages), and must follow the provisions of these Terms of Use as a court would. 

Payment of all filing, administration and arbitrator fees will be governed by the AAA's rules. We will reimburse those fees for claims totaling less than $10,000 unless the arbitrator determines the claims are frivolous. Likewise, Amazon will not seek attorneys' fees and costs from you in arbitration unless the arbitrator determines the claims are frivolous.

The key takeaways from this clause is that Amazon will cover the expenses of the process and that the consumer can seek the same relief as he or she would in court.

The Solution

If you are a consumer whose livelihood depends on your reselling business or if you are consumer who casually resells to earn points, you have a right to hold Amazon accountable. And the way to do so is by filing a complaint in consumer arbitration.


*       

Monday, April 24, 2017

Turn On Two Step Verification for Your Amazon Account

Lately, there have been a rash of hackings on Amazon accounts.  Once the hackers are in, they will change your bank account and siphon the money into their account.  In addition, many times they will start selling items that are bogus, make some quick money, siphon that, and then cause many problems to your account.   It becomes hard to get your money back and get your account reinstated.

Often, these are on dormant account.  An account will have it's last review in 2014 and then 5 bad reviews now saying never received item or item is fake.  That being said, it can happen to an active account too.

Last week I received this message from Amazon.


Hello,

At Amazon we take your security and privacy very seriously. As part of our routine monitoring, we discovered a list of email addresses and passwords posted online. While the list was not Amazon-related, we know that many customers reuse their passwords on multiple websites. Since we believe your email addresses and passwords were on the list, we have assigned a temporary password to your Amazon.com account out of an abundance of caution.

You will need to reset your password when you return to the Amazon.com site. To reset your password, click "Your Account" at the top of any page on Amazon.com. On the Sign In page, click the "Forgot your password?" link to reach the Amazon.com Password Assistance page. After you enter your email or mobile phone number, you will receive an email containing a personalized link. Click the link from the email and follow the directions provided.

Your new password will be effective immediately. We recommend that you choose a password that you have never used with any website.

You can also enable Amazon's Two-Step Verification, a feature that adds an extra layer of security to your account. In addition to entering your password, Two-Step Verification requires you to enter a unique security code during sign in. To learn more about Two-Step Verification, go to Amazon.com Help, go to Managing Your Account, and click More in Managing Your Account, and then click More under Account Settings.

Sincerely,

Amazon.com

This e-mail was sent from an address that cannot accept incoming e-mail. To contact us, please visit the Help section of our website.



The solution is simple.  Turn on Two-Step notification.  I had resisted doing it but this email was enough for me.  All you need to do is go to Settings>Log in Settings from with in your account and you will find the instructions there

Once two step notification is on, you will need to receive a text message with a code in order to log in to your account.

You can set it so that on computers you recognize you don't need to keep doing that but it should keep hackers much further away from your account.


As always, stay safe out there!

Tuesday, April 4, 2017

FBA Temperature Sensitive Deadline Coming Up In May

Amazon warehouses can get up to 100 degrees in the summer so Amazon places restrictions on what can be sent to their warehouses from May 1st until September 30th.


If you have a lot temperature sensitive items at fulfillment centers now is the time to sell or place removal orders if you aren't able to sell by the end of the month.

You can't sell FBA from May through September but you can sell FBM and without the competition of FBA sellers, FBM can be extra lucrative during these months as long as you take shipping costs into account.

Doing well on Amazon is often about finding inefficiencies in the marketplace and exploiting them.  Sure this is more annoying and more work than FBA but use it to your advantage and you can sell a lot of chocolate. just make sure it doesn't melt on the way....

Friday, March 31, 2017

Where Have I Been?

It's been about 4 weeks since I posted anything.  That's a really long time for me. I went almost 90 weeks straight with at least a Turnover Tuesdays post.  What happened?



I don't want this blog to be a job. 


I have been blogging for a long time, since the end of 2011.  Until recently I enjoyed blogging a lot.  It was a great outlet for me.  Instead of boring all the people around me I could bore everyone in cyberspace and no one had to offend me when they stopped reading. Win, win.

That changed with my Turnover Tuesdays series at some point.  I had to put out a post on Tuesday and I wanted it to be a more substantive post.  Many times I would only think of topic on Tuesday afternoon or Tuesday night and frantically put something (mildly) entertaining and substantive out there.   I also pretty much stopped posting any other idea because I thought I was wasting a Turnover Tuesdays opportunity.

I was starting to dread Tuesday and they don't pay me enough to be dreading my hobby so one Tuesday night I was about to write a post and then a business meeting happened suddenly and I didn't have time to put anything out there.


I feel liberated


I thought I would be disappointed to lose my streak but I didn't. I felt great about it.  It was such a load off my back.  It started to hit me that I stopped loving blogging and that was the biggest disappointment for me.


I'm a lot more busy than I used to be

As my Amazon business grows (and other parts of life grow too), I've had less time for non essential activities.  I would much rather have my blog fall by the wayside than my family.


I don't plan on stopping, at least not yet, but it has been great to take some time off.  Going forward, I hope to post randomly on stuff I enjoy.  Hopefully you enjoy it too.  Time to get back to basics!








Tuesday, February 28, 2017

Turnover Tuesdays - Walmart and eBay Are Not Going As Smoothly as I Would LIke

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

The previous posts in the series can be found at the bottom of this post.




Walmart Was Going Great


If you've been playing along at home, I was hoping to use eBay and Walmart (mostly Walmart) to increase my sales and at a minimum mitigate the increased rent that I've begun to pay to allow for more merchant fulfillment and decreased Amazon storage fees.  Walmart does not allow for multi channel fulfillment from Amazon so you must fulfill outside of your Amazon inventory.  That requires space and a team to fulfill orders (or more time from you).

For a while, I was very excited about Walmart.  For the first couple of months I was getting a lot of orders on Walmart's platform.  Not all were very profitable, in fact some were actually losses but at least I was selling old inventory that was much less profitable on Amazon at that point (I wish I had been willing to lower some of them more as the price on some have continued to tank).

I was also selling some items that had great profits.

I was sure that the future was bright.


eBay Never Really Did Great