Accounting for a whopping 34% of U.S. online sales, Amazon is the marketplace no merchant going international should ignore. Hong Kong is no exception and just as local shoppers are purchasing on global marketplaces, local manufacturers and brands can also use those platforms to reach new markets.
In this post, we will look at the importance of Amazon.com as a global marketplace, especially for businesses in Hong Kong who are exploring cross border ecommerce, and the considerations for merchants looking to sell their goods overseas to the US or global markets.
Why Amazon.com Matters
Why not set up your own online store if you already have an established brand? There are powerful ecommerce platforms available for Hong Kong merchants to create beautiful online stores. But while, it’s valuable to have your own branded online shop, don’t think about selling their your own online store vs. selling on Amazon as being mutually exclusive. Your online store can exist alongside an Amazon store.
Given its dominance in the ecommerce sector, Amazon is a great marketplace that can potentially allow your products to be discovered by millions of shoppers worldwide. Amazon generated US$82.8 billion annually as of 2016 in ecommerce sales, over 50% of online shoppers search directly on Amazon for products. Amazon can be a powerful channel if merchants can optimize their listings to achieve a good rankings.
An Amazon Marketplace Success Story
If you’re wondering if you can be successful as a company in Asia selling on Amazon, the good news is that some of the most successful third party sellers on Amazon come from this region. For example, the company Anker, which began by specializing in replaceable batteries and portable mobile chargers, began selling directly on Amazon. Founded by Ex-Google engineer Steven Yang in 2011, Anker focused on delivering reliable and competitively priced chargers. As their product sales grew, Anker cemented top search results on Amazon which in turn drove more sales. Anker went on to raise USD $47 million in venture funding while growing their annual sales past the USD $100 million mark.
Should I Sell on Amazon?
While we would all want to be the next Anker success story, the reality is that listing and selling on Amazon can be extremely competitive. For businesses new to ecommerce, before diving into selling on Amazon, merchants need to consider whether it is a strategic ecommerce choice. Based on our experience working with local Hong Kong and global companies, we would recommend businesses conduct both competitive and margin analysis as part of their overall assessment for selling on Amazon.
Merchants can also begin by surveying the competition on Amazon. If your product space is already saturated, think through what are your brand’s differentiating factors or value-add? As a quick market analysis, do a search on how many other Amazon merchants are selling similar products. Are you prepared to compete against them on pricing, product listing quality (photography and descriptions), and positive reviews? If you can afford to offer competitive prices, you may be able to capture customers searching with a price filter. Quality and differentiated product photography can convince shoppers to click onto your listing and product descriptions/copywriting can also sway online shoppers looking for specific product information. Positive reviews are also key to rank well on Amazon, so research whether your competitors already have hundreds of 5-star reviews.
Merchants considering Amazon also need to familiarize themselves with Amazon’s fee structure. Amazon takes a commission from a merchant for each product sold. In addition, Amazon also has added fees for its FBA service, which helps merchants deliver products to over 75 countries. Before selling on Amazon, you should consider the overall potential profitability of the channel and whether or not it makes sense for your business. Sellers can use Amazon’s Profitability Calculator to evaluate their product margins when selling through Amazon.
Getting Started on Amazon
If you have weighed the options and find listing on Amazon as an attractive option, you can start by setting up an Amazon seller account. Amazon has an individual plan that charges per listing or a professional plan with a monthly subscription fee. Both plans have sales commissions per item. Then, you can create product listings. Note that some product categories are only available to professional sellers and require approval.
Order Fulfillment & Logistics
Hong Kong merchants entering ecommerce with Amazon or another platform will need to arrange logistics and order fulfilment. Amazon also offers “Fulfilment by Amazon” (FBA) where Amazon will automatically process and deliver orders made on your Amazon store. Products with FBA are eligible for Amazon Prime’s free 2-day shipping service, which has over 80 million subscribed shoppers, and can help your products stand out. In addition, FBA provides multi-channel fulfilment (integrating to platforms like Shopify), 24/7 customer service, and return processing for merchants. Amazon also offers FBA in Japan and Amazon Prime Now in Singapore.
Hong Kong merchants are also free to use their own logistics arrangements. EasyShip compares the prices and times for worldwide shipping solutions from Hong Kong. Some courier services that do global shipments include DHL Hong Kong, Hong Kong Post, TNT, UPS and FedEx.
We also encourage merchants looking to do cross-border selling to consider finding long term partners that can assist with warehousing, inventory management as well as shipping and order fulfillment.
Cross Border Regulations, Tax & Compliance
Finally, before getting started on Amazon, Hong Kong merchants should research cross-border regulations before selling to a new country. Countries have different trade regulations, which can have a significant impact on your business, logistics and, subsequently, your customers’ experiences. Factors to check include taxes levied on imported goods, allowed and banned items, quarantine times (if any). For example, merchants who would like to sell to the US should understand how international sellers may need to deal with sales tax.
As a city with a strong history cross-border trade and world-class logistics industry, Hong Kong can be a base to run a cross-border ecommerce business. As the largest global online marketplace, Amazon can be an effective sales channel for you to reach new customers in the Asia-Pacific region. We advise that Hong Kong companies research first to see if their products suit Amazon and consider the logistics of cross-border selling. In order to succeed on Amazon, you not only need to sell quality products at competitive prices, but also need to deliver a great shopping experience for your customers.
Wave Commerce is a Shopify and BigCommerce partner and may receive affiliate revenue from merchant subscriptions to these platforms.