Welcome to Session number 14 of the Europe Million Dollar Case Study. Wow, I can't believe we have got this far already. Time is flying past, and in that time, a lot of progress has been made.
In this week's session we had a special guest, Richard Gilbert, from Payoneer joining us, to talk to us about managing payments as an international seller. This is pretty important stuff, as it involves how you get paid, and how to save as much money as possible on converting international revenue streams. Great stuff!
Before we get into all of the insightful stuff Richard had to share, here's a few Jungle Slumber updates for you!
I have sent a full brief to a photographer in the UK, and the supplier has sent a sample over to them. I paid for the shipping for the sample via PayPal, easy peasy!
Production is still well underway and the factory are getting through the order of 1500pcs day and night.
I will be looking to send around 300 units by air to get them into stock over at the Amazon distribution center in the UK as soon as possible, for the purposes of this case study. I probably wouldn't do this if this product was not a part of MDCS, as it's more costly, especially for a heavier item. However, it is still something to bear in mind if you are in a rush and your product isn't too expensive to air freight.
The wheels are also in motion on the product listing content, which I am working on in the background whilst the shipping and photography are taking place.
Just in case you haven't been around for the full case study, there are also a few other very important things you will to do when you get to this point (inventory on the way), including:
Of course, if you are just joining and thinking what the flip, where am I? What did I miss? You can catch up on all sessions right here.
Here's what we covered in this session:
This week's replay:
And slides:
First up, Richard talks to us about some of the challenges that we face as international business owners. He categorized these into three main topics:
None of these challenges are insurmountable, as we have discovered throughout this case study. I have never sold anything on Amazon before, or had an ecommerce business. But with the right education and the right suppliers and partners at my side, there has been no part in the journey that I haven't been able to figure out and overcome.
Here's the bit you really need to know, in order to make a decision on how to manage payments for your business.
There are three ways you can go about converting your Amazon revenue in other currencies into your local currency:
Let's assume that most sellers or soon-to-be sellers won't opt for the second option right now, so how does Amazon's ACCS service compare to a third party?
Amazon's ACCS
A third party service:
Richard explains this really well in the webinar so make sure you have a listen to the replay.
To put it simply, currency and conversion rates are a result of banks trading currencies with each other in large volumes. The rates are set according to the buy and sell and demand, and the rates banks trade with each other is called ‘Inter-bank' or ‘Mid-market' rate.
Then there is a percentage added on to each transaction called ‘Spread' or ‘Margin'. This is how banks, Amazon, or a third party service makes money on your conversions.
The reason a third party like Payoneer has better margins compared to Amazon is because they buy in bulk from the banks.
Richard used a simple mathematical example to illustrate how this would impact you, the seller…
Example:
➡️ If the sellers UK £ sales revenue from Amazon is £100,000
➡️ And the Mid-market rate = 1.327 GBP/USD
➡️ Amazon applies a margin of 3.75% (1.2772) =$127,720
➡️ Payoneer applies a margin of 2.0% (1.3005) =$130,050
This is just a crude example but this shows how you can save money using a third party instead of ACCS. In this example above you would gain:
There is nothing wrong with using Amazon's service, especially when you are starting out for the convenience factor. But once you start to make serious revenue, you will definitely benefit from having better conversion rates, to the tune of thousands of dollars, pounds or euros!
By this point, you are probably wondering how third party services allow you to convert currencies and pay your suppliers or VAT obligations. As Richard explains, this is usually done by setting up local accounts across marketplaces. So you effectively do end up with local bank accounts in all of your marketplaces through a third party service, without the extra hassle of having to fly around the world to set them up.
This means you can either transfer money to your own bank account and home currency, or keep funds in your local accounts in order to pay for your business expenses. This could be your accountant, your freight forwarder, your supplier and even your VAT.
If you are a US seller doing business in the UK, using a UK accountant, then you would pay your accountant and your VAT in GBP. So it would make sense to keep some of your revenue from Amazon.co.uk in this currency, rather than convert it to dollars, only to convert it back to pounds again to pay for these things.
This becomes even more effective if you are selling across European marketplaces and owe VAT in different countries.
In addition, Payoneer has other cool features too, such as the ability to get bank cards for your account, as well as a growing network of suppliers who are on the Payoneer network, which means you can pay suppliers for free.
If you're already an international seller, or just about to become one like me, make sure you check out Payoneer and find out more about their services as a third party option for managing your Amazon payments.
Getting paid is a pretty important part of running your Amazon business, so if you haven't already made up your mind, think about how you want to manage your international payments.
I am glad Richard shared this information with us at this stage because, exciting news drum roll, we're going to be covering the much anticipated launch strategies for Europe in next week's session!!!
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