Tim Schnoeckelberg, a German citizen focused on online selling, especially over Amazon e-commerce
has been an e-resident & 1Office client for over 2 years now. 1Office interviewed him recently to learn more about him & why he chose to use e-Residency & 1Office to grow his e-commerce business.
1Office: Hello Tim, it is nice to speak to you again. Could you please tell us a little about yourself and your business as an e-commerce seller?
Tim: Hello! Well, I have been an e-commerce seller for over 8 years now. That also means that I am quite location-independent and travel a lot. I initially started with selling over eBay back in the day, then additionally over Amazon, which I focus on now. Initially, I started with creating brands in sports nutrition & dietary supplements, and eventually also moved into cosmetics for which I work with European as well as Asian suppliers quite closely.
1Office: Why did you choose to focus on selling over Amazon e-commerce in Europe?
Tim: It is just easier to sell over Amazon since a lot of activities like logistics, storage, door-step delivery, etc. are taken care of by Amazon itself allowing me to focus on selling. Also, Amazon e-commerce has grown quite large across Europe and provides a good potential client base, especially considering that Germany is still my home market. Also, I have been selling across the world and I still feel that Amazon Germany & Amazon U.K. offer some of the most profitable customers – those who do not mind paying extra for high-quality products.
1Office: Why did you decide to switch to ‘1Office for Amazon’ to sell your products using an Estonian company, even though you are from Germany and hence in the EU?
Tim: Although I am German, I have lived in Switzerland, which is known not to be a member of the EU. In order to be allowed to sell certain products in the EU, a contact person and responsible person must be available in the EU. With 1Office & e-Residency, Estonia offers a simple, cost-effective and, above all, unbureaucratic solution for establishing a company in the EU and more importantly, continuing managing it. Anyone who has ever founded a corporation in Germany will appreciate the advantages of Estonia’s short and fast official channels and fully digitized procedures which save entrepreneurs like myself a lot of money and time.
Also, to be honest, ‘1Office for Amazon’ did not exist when I started as a client. However, all the elements like getting access to a business banking solution, low-cost accounting & personalized support have been most important to me as a client and I was extremely happy I could find all of these through one channel. In any business, we can all start at the same base level but eventually we all start to have specific needs, and this is where the 1Office team has been quick to respond, very reliable and always finds a solution.
1Office: How do you think ‘1Office for Amazon’ would continue to help you grow your Amazon e-commerce business?
Tim: I am really happy that now there is a specific product for Amazon sellers like me in a single place. I am already a 1Office customer and have an Estonian company, access to business banking and administrative services like accounting, VAT filings, etc. in the package. However, I think the accounting package is quite interesting and I should switch from my current 1Office package to the ‘1Office for Amazon’ package, because the monthly costs are fixed and it also includes VAT filings in U.K. & Germany, including accounting for the Estonian company. Administrative costs are always a worry for me – because as my sales increase, generally so the accounting costs – so I am really happy that with ‘1Office for Amazon’ they will remain fixed and obviously help me grow my sales without growing these costs. Thanks to you guys!
1Office: What would be your advice to Amazon sellers to use ‘1Office for Amazon’ and why would you recommend they switch to this solution?
Tim: Hey, If it works for me – then it works for you…Ok. Jokes aside, I think the best part is that everything with ‘1Office for Amazon’ is in one place – an EU company with online management, business banking, accounting, Amazon account opening, VAT filings, etc. The other thing is that I know whether I am selling on Amazon U.K. or Amazon Germany, my administrative costs are fixed and this is great! I can plan all my activities better and focus mostly on selling. I am based inside the EU but also have experience of working with non-EU countries, especially in Asia and I think this solution will be of even more value for them to sell on Amazon Europe since a lot of them find it difficult or at times, even impossible to sell over Amazon Europe. I am definitely going to recommend this solution to other sellers I know!
1Office: Thank you for your feedback Tim and being a value 1Office customer! We look forward to continuing this journey with you & growing your business.
About starting your Amazon e-commerce business
Selling over Amazon as a pan-European FBA (Fulfilled by Amazon) is becoming very popular. As Amazon takes care of warehousing, logistics (even same-day delivery – Prime). Amazon has of course grown its brand to echo trust and credibility in the minds of its large consumer base across Europe. Amazon has also strategically created a variety of different warehouse hubs across Europe and officially operates 5 different marketplaces in U.K., Germany, France, Italy & Spain, which means that customers based close to these countries can also access the Amazon website nearest to them, order a product and have it delivered to, for example, Austria from Germany. The best part is that Amazon deals with the entire logistics chain for the seller! This allows sellers to focus on their core business, marketing & advertising activities on Amazon, etc.
But to fully understand The Amazon Universe it is important to highlight some of the major challenges associated with running a cross-border drop-shipping / Amazon FBA business first. One major challenge which has restricted drop-shipping businesses & Amazon e-commerce sellers from growing to their full potential – high accounting costs and bureaucratic reporting requirements in Europe. In an attempt to provide a solution, many third-party software and technology products have been invented to collect VAT-related data and provide accurate information which can, in turn, be transmitted to the relevant authorities. Even Amazon has tried to create VAT calculation, accounting & reporting tools. Unfortunately, the truth is that none of these solutions is fully compliant, and to ensure smooth operation of an Amazon account and the business itself, any seller whether based inside or outside the EU (but selling in the EU of course) has to rely on human talent. This is not necessarily a bad thing since it allows the seller to maintain focus on the core business and outsource a set of administrative tasks to external experts. However, this creates a new challenge – since this involves manual work, as sales volumes rise, so do the book-keeping and reporting requirements and as a result time per manhour is needed for this purpose. The end result is growing costs with growing volumes, which at some point can indeed be quite a lot, even eating into the business itself.
For sellers based outside Europe
In major hubs like South Korea, the U.S. and CIS countries like Ukraine, there are even more challenges since they cannot even sell over Amazon’s European marketplaces through their domestic companies and at times they need to find a VAT guarantor to be able to register as a VAT payer before being accepted as a pan-European Amazon FBA seller and most companies are either unwilling to act as guarantors since they would be penalized in case of any issues on part of the non-EU based seller or simply end up charging a hefty fee to act as guarantors. In a number of countries like India, South Korea or Ukraine, governments pursue protectionist policies because of which even though fintech solutions like Payoneer (official payment partner for Amazon), etc. are available, they are unfortunately restrictive and lose a large part of their utility as better banking alternatives.
This further creates challenges – for example, in India, sellers cannot maintain foreign exchange reserves in their Payoneer accounts beyond a certain time limit which makes it challenging for businesses to pay suppliers or even issue refunds at times if a product is returned without losing money on forex conversions. Also, local Payoneer users in India cannot receive payment cards even for their business accounts which makes it harder for sellers to conduct a variety of transactions imperative to running a global business smoothly. And last but not the least, as soon as sellers cross a certain transaction volume, they are required to supply a variety of additional documents which slows down business activities due to bureaucracy, which is even true for South Korean sellers. In Ukraine, the situation is worse, where aspiring Ukrainian sellers cannot even sell on Amazon marketplaces in Europe from a Ukraine-based company.
Estonia and ‘1Office for Amazon e-commerce’
The solution clearly seems to be to have an outpost – another company based in Europe that can benefit from easier VAT registration, accessing the European version of fintech solutions like Payoneer. Yet again, this is not as easy as it seems, even for many people based inside the EU since incorporating a company in most European countries comes with more bureaucracy, rather large startup capital requirements, need for local directors or employees, and the list goes on.
But let’s look into Estonia, a rather small EU nation with 1.3 million people right next to Finland. Geographically, it is larger than Denmark, Switzerland or even the Netherlands. So you can imagine that in a large country, the small population is quite sparsely distributed and there are islands where maybe only 15 people live! This created a challenge, yet an opportunity for the government to provide public services to all citizens which led to an e-governance revolution in Estonia in the late 90s. Fast forward to 2019, today Estonia has one of the most advanced e-governance platforms in the world with over 5’000 e-services which citizens can access at the click of a button ranging from e-police, e-law to e-health, e-prescription and of course even e-tax and e-business registry. In fact, it is the only country in the world where people can even vote over the internet.
In 2014, a few visionaries in the public and private sector got together and wondered that if Estonian citizens and residents could so easily access public services electronically from anywhere in the world then why could they not extend at least a section of these e-services to foreign businesses operating in Estonia to access the EU single market. This gave birth to the Estonian e-Residency program in late 2014, through which the government issues a digital-identity card, using which an e-resident who can be a national of any foreign country, can access close 1’500 e-services to establish and manage their business entirely online – digitally sign documents & contracts, conduct board decisions, declare taxes in Estonia, access virtual accounting services – all at the click of a button from anywhere in the world. Furthermore, unlike other countries Estonian does not mandate companies to have a local director or any local employees and even has one of the most business-friendly tax systems in the world – Estonian companies do not pay any tax on reinvested profits or undistributed income, which in essence implies no corporate tax. This was specifically done to encourage small and medium companies to grow as efficiently & quickly as possible. The best part is that digitalizing everything reduced the administrative load for the public and even the private sector by a huge margin, which meant that everything could be offered at a fraction of the cost compared to most other countries, making the Estonian and EU-business environment more accessible to entrepreneurs around the world.
But coming back to the matter at hand – how does this help drop-shippers and Amazon sellers wanting to sell in Europe? This is where a service provider like 1Office comes in, which was in fact one of the private-sector contributors during the creation of the e-Residency program itself. For e-commerce sellers, 1Office understood the challenges listed above, and created the first ‘one-stop-shop’ solution where a seller who would like to start selling on Amazon e-commerce stores in Europe (starting with Amazon U.K. or Amazon Germany) from anywhere in the world can access the following:
- E-Residency Application and starting a company in Estonia together with virtual office & contact person services – Sellers can easily apply for e-Residency via 1Office. Once they receive their e-Residency digital ID-card, 1Office automatically processes the registration of the company in Estonia and also provides a virtual office address and even a contact person service, which is needed in case any documents need to be received on behalf of the founder(s) of the company.
- Business banking with Payoneer – For me, this is one of the biggest advantages especially from the perspective of a seller based outside the EU. Firstly, because Payoneer is the official payment partner for Amazon and the process to get paid is quite seamless. Secondly, any seller can access the full spectrum of features that Payoneer provides since it is no more an Indian or South Korean seller using Payoneer but technically speaking – their Estonian company which has access to the Payoneer account. This means access to multiple currency wallets to receive revenues and store currency in EUR, USD, GBP, AUD, CNY, CAD, MXN or JPY. Payoneer even provides mass payout solutions for large volume transactions and an international payment card for the business account which provides sellers with a variety of options to withdraw funds or pay third parties. The best part is that everything happens online and because of a partnership with 1Office, even the accounting process is user-friendly! Lastly, Payoneer even has special offers for 1Office customers which are an added bonus on top of everything else. This model has also major benefits in managing money too. The value of western currencies like USD, EUR, etc. fluctuate a lot and generally appreciate in comparison to Eastern currencies like INR, CNY, KRW, etc. so being able to maintain forex reserves in wallets with Payoneer can indeed be a huge long-term advantage. Besides this, if the Estonian tax system applies to your business, then you can always reinvest these funds into your business, buying more inventory, sales & marketing on Amazon, etc. without any tax-related outflows and this can indeed create a compounding effect for the business itself too. And of course, just the simple fact that everything can be managed online saves time and as a result, money!
- VAT registrations and Virtual Accounting – Learning from the challenges listed above and since 1Office actually has offices in 6 countries in Europe, including the U.K., sellers get a U.K. or German VAT number rather easily to begin selling on Amazon U.K. or Amazon Germany as pan-European FBA sellers, since their Estonian company is considered a distant seller. The biggest advantage though is that all book-keeping, accounting, etc. is also taken care of by 1Office for a fraction of the cost compared to many other service providers. The cherry on the cake – this accounting cost is fixed and does not increase as volumes rise since the process is automated using in-house solutions created by 1Office!
- Amazon e-commerce account creation or conversion for existing sellers – To make it easier for first-time sellers, 1Office also helps open the Amazon U.K. or Amazon Germany account once the Estonian company has been created and registered as a U.K. VAT or German VAT payer, respectively. In the case of existing Amazon e-commerce sellers, 1Office also helps convert the account and register the Estonian company under the same account sellers have been using to sell in Europe. This avoids any challenges existing sellers might face when choosing to use this ‘one-stop solution’ and this also takes away the hassle or worry for existing sellers of creating a new account and transferring their inventory, re-building the brand on Amazon marketplaces, etc.
For more details, please visit 1office.co/amazon or write to firstname.lastname@example.org.