Amazon International Expansion with PingPong Payments
We discussed with Ning International expansion opportunities with Amazon, how to manage cross-border payments, and avoid unnecessary hidden costs.
Expanding your business to new marketplaces is a huge opportunity, but there can be a lot of challenges on the way. In this episode, our guest is Ning Ye, the Head of Business Development at PingPong Payments, a payment provider enabling e-commerce sellers to streamline their global payment.
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03:31 What are the challenges selling internationally?
04:44 how to avoid hidden costs
06:39 How to manage cross-border payments?
10:03 Payouts: how to optimize the money flow.
14:50 What you should know about VAT
17:10 Ping Pong, Payoneer, PayPal?
03:31 Amazon international expansion strategy — challenges selling
I think, selling internationally is a huge opportunity, and also with COVID-19, I’m also seeing a lot more sellers are trying to mitigate the risk of being overly concentrated in one marketplace. So that’s definitely a very good trend to capture. But there are like you said, there are a lot of challenges, that come with it. I think, first of all, come from the compliance point of view, especially if, when we’re talking about European marketplaces, VAT is the question that’s not going to be avoided. You have to set up your VAT, register your tax numbers with all the local authorities. And after that, you have to make sure that you pay them, you are doing the calculation correctly. So that’s the first thing compliance wise.
And the other one is payments, which is, you know, happened to be what we are specialized in. Because you’re dealing with cross border, dealing with different currencies and a lot of the hidden costs could be there, for you to potentially save if you’re using the right, services. So when it comes to payments, so say if you are a US seller, and you’re selling to Amazon Dakota, UK, the currency of the sales that you receive from Amazon is going to be in GBP. However, you’re probably paying a lot of your staff in USD. And on top of that, you probably also have a lot of suppliers in different countries, for example, in China, in Vietnam. So that means you need to have a pretty put together multicurrency management system so that you can avoid all of those unnecessary hidden costs.
So payment optimization is definitely going to be one of the challenges as well. And apart from those two, I would say, language could be a challenge if you’re selling to other European countries, which is not the UK. So you have to make sure that your titles, your keywords, everything with your Amazon listing is optimized due to the local user habit.
Also, product selection of what works well in the US may not be something that you can sell in Europe. So I think those could all be the challenges for my opinion.
06:44 How to manage cross-border payments?
So the typical problem when it comes to cross border payments is really how to avoid unnecessary, hidden cost rates. So the hidden cost includes transaction fees via traditional banks and also the FX fees. When you’re trying to convert from GBP to USD, through your traditional banking, they will charge you a lot in terms of the FX cost on top of pretty high transaction fees as well.
So I think the way to optimize it is to really have a unified system, a unified portal to manage all of your paintings and pay outs. By paying, I mean, all your sales proceeds from Amazon in different currencies, and by payouts I mean, when you have vendors you have to pay in another country, in another currency, or your employees in a different country.
So let me go into a bit more details in that. So let’s talk about paying first. Let’s just take the example of US sellers selling to different countries in Europe. So the currency that you receive primarily probably is going to be in GBP and you are. And the traditional way, what the seller would do is to use its USD bank account to fill in the seller central of the UK or other EU countries seller central.
What Amazon then will do is to transact all of those GBP and EUR into USD and send through wires to the seller’s USB bank account. And the savings potential in that process is huge because Amazon is taking the FX fees and it’s charging the transaction fees to the seller. So with a PingPong solution, what we do is we allow the sellers to open a PingPong account. It’s a multicurrency PingPong account. What that means is when the seller is receiving money from the UK, from other EU countries, we allow them to open a local bank account with PingPong in the system, and they can actually apply and get those accounts immediately in like a few seconds. And they can feel a GBP bank account and EUR bank account in those respective seller central.
And then what Amazon would do is to send GBP and EUR to the PingPong bank account, and from there, the seller can have the flexibility to either transact all the currencies back into USD and withdraw to its bank, or maybe the rate is not super satisfying and the seller can just wait for a few days until he sees the rage, that’s more an in favor of himself, and then he can make the transaction.
So that’s just on the paying side.
And now let’s also talk about payouts. So after receiving the money to the PingPong account there are a few things the seller can do with all of those multi-currencies. The seller may have local advertisers he needs to pay in local currencies and through our system, the seller can just pay in the same currency, which is to avoid the FX exchanged. So comparing that to the traditional way, it’s so much better. It saves the seller so much money because in the traditional way the seller receives a USD from Amazon, and then he needs to go to his bank and do the FX exchange from USD to GBP so that he can pay for local VAT, for local vendors. And with our solution, the seller never has to do it. If the seller knows he has some local vendors, local VAT, he needs to pay, he can just leave the GBP in the account and using our system to directly pay those vendors in the same currency.
So he never has to suffer from any FX losses or any transaction fees when it comes to cross the border. So that’s another benefit of using our system to optimize the money flow and the sellers can pay not only its local suppliers but also a global one. We have a pretty advanced FX currency converter embedded in every seller’s PingPong portal. And the seller can just transact on our favorable rate definitely much better than traditional banking. He can use that to transact the currency that they receive from Amazon into whatever currency he needs to pay globally, whatever currency like the Chinese currency or USD, we support more than 10 currencies in our system, which covers, e-commerce sellers basic needs when they need to pay globally.
So I would say that’s the most optimized solution for a seller.
14:50 What you should know about Amazon VAT. What are the main difficulties?
• The first challenge, I think a lot of sellers are facing when it comes to VAT is that they have to go through the long process of registering the VAT. You have to separately register for the UK, for Germany, for France. So that’s obviously a process that takes a lot of investment and a lot of time from the seller. So that’s the first step.
• And then the second step is when it comes to payments, it also requires a lot of optimization. I don’t want to repeat what I have just mentioned, exchanging currency back and forth. I think that’s well explained already.
• Another challenge when paying VAT is you have to make sure that your VAT payment arrives with those local authorities, or like the local vendors on time. Because if your payment is somehow delayed in that process, then you’re probably going to be fined. Or you’re probably going to have a bad record with the local authorities. So we also offer at PingPong a VAT payment service to all the sellers. We allow them to pay in local currency that they receive from each locale, which avoids the high FX transaction fees. And the other one is we offer trackable payments, like through our sales representatives and through our customer service people, a seller can always track through us, where is my payment now and how much longer it’s going to take until it arrives with the local authorities. It provides a lot of certainties in terms of the payments for the sellers as well.
17:10 PingPong, Payoneer, PayPal?
I think the first advantage, which is the very obvious one is the local bank account capability that we offer, is just much better than anyone else in the market. So we offer to support all the Amazon locales in terms of the local bank account capability, aside from Brazil and Saudi Arabia at the moment. But for those countries, nobody can provide a local bank account capability yet, and we’re actively working on it. But aside from those two countries, we offer a local bank account to absolutely every other locales. So from the FX savings perspective, we are the best on the market. Through that capability, we’re also offering a lot of business growth potential to the sellers.
Just to go into a bit more details of that, if you’re a seller, US seller, now you’re thinking about maybe only expanding to the UK, which is the bank account capability, that a lot of competitors would offer because that’s relatively easy. However, maybe 6 months later you heard about this amazing growth opportunity at Amazon.uae, and it’s UAE marketplace. Then you want to expand to that marketplace as well. What you need is a local AED bank account. And we are the only provider on the market that offers that capability. So if you’re using our competitor’s service, then where you have to do, if you don’t want to lose a lot of money is to open another account with PingPong while using the competitor’s service. It’s not going to be the most optimized when it comes to your financial management. So if you work with us, then we offer you all kinds of local bank account capabilities. You only have to do business with us. You manage all of your e-commerce sales in one portal, which offers you a lot more flexibility in terms of FX and also a lot of convenience in your financial management. So that’s the first advantage that we have.
And secondly, product-wise, we’re always very up-to-date with all kinds of sellers’ needs. A good example of that is in the e-commerce industry you probably started from a two people operation and then growing into a 10 people, 20 people company, relatively like medium or large size company pretty quickly, because the e-commerce industry grows very fast and that’s the nature of the industry. So then you started to have a finance team, a marketing team or operations team, a sales team, and all of those teams probably need to have access to your Amazon sales information.
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However, maybe the finance team would only have the authorization to move the money, to receive payments, and also to pay out, so to cater to that kind of needs, we have a multi-access permission management system. So if you open a PingPong account for your entire company we can allow different teams to have different permission in managing the account. We would have the payment authorization too, for the finance team. We would have the viewing permission for the sales team so that they can, you know, keep an eye on how much sale is that they’re bringing in from different marketplaces. So, it just provides a lot of convenience for the company’s operations. So I’ve, that’s just an example of one of many product innovations that we’re rolling out on a monthly basis. So the product, innovation is one of our biggest advantages against our competitors. We’re just closer to the customers. We talk to them on a daily basis, and we’re always listening into what they need, and we’re developing our products to cater to their needs pretty fast.