You may have heard of different success stories of e-commerce entrepreneurs with Amazon FBA. Hearing about it may have given you the thought of going into it yourself. Then you start looking up how to start selling on Amazon FBA. You can start using your personal accounts, but if you have growing into an empire in mind, then it would be best to set up your Amazon FBA Company.
But where, you might ask?
Amazon FBA in Asia
A lot of e-commerce entrepreneurs have set their sights on Asia for tons of reasons. You might be thinking of setting up in Mainland China or Hong Kong or any other country in Asia. It could also be a logical decision, especially if you are from or based in Asia. But in the world of e-commerce, that doesn’t necessarily follow.
It still is best to weigh your options. And, if you have Asia as one option, this might help you decide if it’s a go or a no. We will show some of the benefits that you can get should you decide to go for Asia and some drawbacks that you have to consider too.
Advantages of Setting Up Your Amazon FBA Company in Asia
1. Easy Access To Most Product Factories
Wherever you are in the world, you can spot products made in Asia. China, Indonesia, India and Vietnam are just some of the known manufacturers in Asia. The manufacturing haven though for most Amazon FBA companies is China. It may not be too popular when it comes to quality but most Chinese factories have the ability to customize products based on your specifications or needs. And, for a cheaper labor cost.
If you have the means, it will be easier for you to go and visit the factories yourself. It is very important for you to do factory visits where you can discuss with your supplier in person how you want your products to go.
2. No discrimination from other Amazon sellers
One of the things that might give you second-thoughts of going for Asia for your Amazon FBA Company is the stereotyping being done on Asian sellers versus those based in the US or Europe. Or, if that tagging will have a negative impact on your marketing if you wish to sell in other marketplaces. While that might exist in other platforms, in Amazon, you wouldn’t be tagged differently.
If you want to sell in the Amazon USA Marketplace, you can do so even if you set up your Amazon business in Hong Kong, for example.
3. Amazon is expanding continuously in Asia
Amazon has been transparent about their plans in their operations in Asia, going forward. While it has already announced that its online retail operations in China shall be closed down, other initiatives being pushed proved that Amazon still sees bright opportunities for business in Asia.
Around April this year, Amazon disclosed that its cloud computing arm, Amazon Web Services is opening data centers in Hong Kong. It also has offices in Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. They are seeing a surge in the demand for cloud services.
Amazon Air, the in-house air cargo fleet of Amazon, recently began its daily operations flying out of Stevens Anchorage International Airport in Alaska. While it says the move was to cater to the needs of Alaska, observers noted that it could well be a strategy to position itself to start flying to Asia. The said airport is the fifth busiest cargo airport in the world and is the technical stop for aircraft traveling to and from Asia and North America.
If Amazon sees this region as a market that it cannot just let go, wouldn’t you want to ride on that same tide?
4. Taxes are generally lower
Corporate taxes and other business taxes are also key variables to consider in choosing where to set up your Amazon FBA Company. As provided in a report on the latest corporate tax rates in the world, the Asian region is following Europe as having the lowest average corporate tax rates. Hong Kong, for example, has a low corporate tax rate of only 16.5% compared to other countries’ tax rate of around 30%.
5. All other allied services to an Amazon business are established and available
By allied services, we mean those services that are crucial to complete the Amazon business flow. We’re talking about sourcing agents, logistics or shipping companies, fulfillment centers, quality inspection, Amazon product listing, and many others. With these allied services available plus you being near the manufacturers, Asia is seen as having a fully-integrated, cost-efficient Amazon business chain.
Disadvantages of Setting Up Your Amazon FBA Company in Asia
1. Regulatory changes in a Country’s E-commerce Law and Guidelines
Any change to the E-commerce Law or Guidelines of the country of your marketplace and where you’re based at, will always have a direct impact on your Amazon business. A good example would be the recent modifications done by India on its regulations governing foreign direct investments (FDI) in E-commerce and data localization and privacy.
Expansion plans of Amazon and Flipkart, the leading e-commerce companies operating in India, are facing a headwind with the implementation of the new FDI or E-commerce rules. This change in regulation prompted these two companies to revamp their operations and comply with the new regulations. Marketplace entities and their conglomerate groups are prohibited from owning or having control over the inventory of vendors. In this scenario, they will be treated purely as a marketplace that will facilitate the transactions between the buyer and the seller. They will also lose influence over the prices of the products sold through these platforms. This is just one of several changes done by India in its e-commerce regulations.
Regulatory changes such as this are occurring frequently in different countries in Asia. Not only that, there are stricter Anti Money Laundering laws that could also impact your business especially if your orders are by bulk.
2. You will be up against other entrepreneurs in other online ecommerce platforms in Asia
Alibaba, Lazada, Shopee have a very strong online presence in Asia. Alibaba, for one, is considered to be the e-commerce giant in Asia having done investments and acquisitions in local businesses to expand its reach. It even acquired Lazada as its arm in non-chinese speaking regions in Asia. It would seem that Alibaba has the home court advantage having taken a strong foothold in this region.
This may not be too much of a concern though if your market is the US or marketplaces other than in Asia. But you have to check out new developments every now and then as Alibaba is moving towards going more global too.
3. Inter-region trade wars
You might have heard about the US-China trade war that is creating such a buzz recently. Having two giants battle it out has affected the global business platforms – online and offline.
A lot have weighed in on the issue and shared their insights about the trade war and how it can affect Amazon sellers.
Some Amazon sellers in the US marketplace are considering factories in Asian countries other than those in China. Others that find changing suppliers not feasible for now are considering other marketplaces such as Europe or Australia. Either way is a resolve that Amazon sellers can think of to counter the effects of trade wars.
4. Complex cross border financial transactions
There are a lot of factors that affect the efficiency of cross border payment transactions. This is true not only for Asian companies but generally for ecommerce businesses. You have to pay your supplier in another country, your online team from all over Asia, you receive payment from your buyers. Of course, you would be dealing with multi-currency payments.
Among many other factors that you have to take into full consideration for these types of payments are foreign exchange rates, interbank service fees, currency conversion rates, ever-changing policies of banks or other financial agencies, and the finance landscape of the country or region that you’re operating in or with.
If your marketplace is Asia, there are payment platforms that have established the cross-border payment flow. Still, you have to study thoroughly the features of each payment platform and if they are compatible with your B2B chain. The catch here though is other ecommerce platforms such as Lazada or Shopee has a Cash On Delivery option which is more enticing to buyers.
Some have also thought of opening a bank account in their marketplaces just to accommodate easily the payments from their buyers. Some of those who are selling in Amazon USA, are thinking about opening a US bank account that could be a feat for some.
5. Products can be easily duplicated
Remember that factories, specifically those in China, have the ability to copy product designs. Most of these factories too are technologically advanced that they can duplicate your products at a faster rate and at a cheaper cost. Your competitors or copycats might take advantage of that and be able to sell the copy of your product for much, much less.