Are you thinking of selling products on Amazon Australia but not sure where to begin?

Before jumping in and starting your own Amazon business in Australia, there are some important things that you will need to think about first. 

In this post, we will go through 5 things you need to know before starting your Amazon business in Australia

What Are Amazon’s Key Policies?

Before you start selling on Amazon, you need to know about Amazon’s key policies and agreements, including the Amazon Services Business Solutions Agreement (Business Solutions Agreement), the Amazon Seller Code of Conduct, and Amazon’s Product and Listing requirements.  

Amazon Services Business Solutions Agreement

In a nutshell, the Business Solutions Agreement is an agreement between you (the seller) and Amazon that sets out the terms and conditions that govern your use of the Amazon marketplace.

Key provisions in the Business Solutions Agreement that Amazon sellers should take note of include:

  • Term and Termination: Amazon may terminate the agreement immediately in circumstances where an Amazon seller breaches the terms of the agreement (e.g. the seller central account is being used for deceptive or fraudulent or illegal activity).
  • Indemnification: The seller indemnity clause under the agreement is very broad. This means that an Amazon seller will be responsible for compensating Amazon in the event of a claim being made against it in certain circumstances (e.g. if you have sold a defective product to a customer and they are injured as a result). 
  • Limitation of liability: Amazon limits its liability under the agreement to six months worth of fees paid by the seller to Amazon. However, an Amazon seller’s liability under the Business Solutions Agreement is unlimited, which means a seller could potentially be required to pay Amazon a large sum if there is a claim.
  • Insurance: If your business regularly makes $10,000 or more per month, Amazon requires the seller (at their own cost) to have insurance in place that covers product liability, personal injury, and property damage. You can learn more about product liability and insurance here.  

Amazon will update the terms of the Business Solutions Agreement from time to time, so it is important that you stay up to date with any recent changes to avoid breaching its terms, otherwise you could face a  suspension or ban of your Amazon seller account.

Amazon Seller Policies

Amazon also has several policies that Amazon sellers must uphold when conducting their business on the platform. These policies involve the payment of fees, communication guidelines, customer reviews, supply chain standards, intellectual property, shipping, taxes, and a whole lot more.

If you are thinking of running your Amazon business under the “fulfillment by Amazon” program (or “FBA” for short), there are a number of additional policies that you will need to be aware of.  

Which Business Structure Should I Choose For Selling On Amazon?

The right choice of business structure for your Amazon business will depend on a number of factors, including: 

  • the size and nature of your business;
  • your personal circumstances; and 
  • your long-term goals for your business. 

There are four main types of business structures for Amazon sellers to choose from:

Each of these structures has its own advantages and disadvantages, so it’s important to understand the key differences before making your decision.

Now, let’s walk through what these business structures are, and how to choose the correct structure for your Amazon business. 

Sole trader

If you are a sole trader, you will be legally responsible for all aspects of the business, including the day-to-day operations, funding the business and any debts or liabilities incurred by the business. 

This is also known as unlimited liability

A sole trader setup can be a good option if you are a one-person operation and don’t want to go through the hassle of setting up a company or a trust. A sole trader also has less admin to deal with and setting up is usually much faster and less costly than a company or trust.

Partnership

A partnership is similar to a sole trader in that you will be legally responsible for all aspects of the business, but you will be sharing this responsibility with one or more partners. This can be a good option if you’re starting a business with friends or family members. 

If you are looking at going into business with other people, it is important that the rights and responsibilities of each party are clearly set out in a Partnership Agreement

Company

A company is a separate legal entity from its owner(s) (i.e. the shareholder(s)) which means that the owner(s) of the company will not be held personally liable for the debts and liabilities of the company. A company is usually more time-consuming and costly to set up than a sole trader.  

There are also a lot more ongoing compliance obligations and admin with a company. A company can be a good option for businesses that are looking to grow or expand, as it is typically easier to raise capital for growth.

It’s also the recommended structure for businesses that are likely to enter into high-risk transactions, as there is a greater level of protection afforded around liability. 

Trust

Finally, a trust is an arrangement where the business and its assets are legally held by a trustee (this can be an individual or a company) for the benefit of another (the beneficiary). Like a company, a trust offers some protection for your personal assets. Trust structures can be very complex and it is worth engaging a lawyer and a tax advisor to help you set this up.

How Do I Protect My Intellectual Property On Amazon?

In Australia, the best way to protect your business’s intellectual property (IP) is by registering it with IP Australia.

For Amazon sellers, the most common IP they will have will be a trade mark or a design. 

Trade Marks

Amazon is a very competitive online marketplace to sell your products and a strong brand is incredibly important for Amazon sellers as it sets them apart from the competition. This means it is vital that Amazon sellers take steps to protect their brand and their intellectual property.

This is where trade mark registration comes in. 

Things like logos, business names, taglines, catchphrases, packaging, colours and shapes can all be registered as a trade mark. In most cases, a trade mark will be registered for a period of 10 years and may be renewed for additional 10 year periods indefinitely.

Designs

If you are selling your own products and want to protect their design, you may wish to register your design with IP Australia. 

A design right protects the overall visual appearance (but not the function) of new and distinctive products, including the shape, colour, configuration, pattern, and ornamentation of the product. 

A design right can only be registered for a maximum of 10 years, but unlike trade marks, design rights cannot be renewed or extended beyond the initial 10 years.

What Is The Australian Consumer Law and Does it Apply to Amazon Sellers?

The Australian Consumer Law (ACL) is a national law that protects Australian consumers when they buy goods and services. The ACL applies to all Australian businesses (including Amazon businesses) and covers things like unfair contract terms and business practices, consumer product safety, misleading and deceptive conduct and consumer guarantees

The ACL also gives consumers the right to ask for a refund or exchange if they’re not happy with their purchase. The ACL is administered by Australian State and Territory consumer protection agencies, as well as by the Australian Competition and Consumer Commission (ACCC).

As an Amazon seller, it is essential that you understand your obligations under the ACL to make sure you do not fall afoul of these rules when selling your products on Amazon’s marketplace.

Do Amazon Sellers Need A Supply Agreement With Suppliers?

While there is no legal requirement to have a Supply Agreement in place with your suppliers, it’s highly encouraged to have one so that you can refer back to those written terms in the case of a misunderstanding or dispute.

A Supply Agreement will set out key terms such as:

  • Product details: the description and/or specification of the goods to be supplied to you
  • Pricing: whether pricing is fixed for the term of the agreement or whether there will be periodic pricing increases (e.g. in line with the consumer price index or some other agreed rate)
  • Exclusivity: whether the supply of goods is exclusive to you within a certain area or territory
  • Order and payment process: this includes details such as whether you need to submit a purchase order each time you place an order, whether there are any minimum order quantities, and how soon after you place your order will your order be fulfilled by the supplier
  • Shipping: details such as which party organises shipping and who is responsible for the cost
  • Title to goods and passing of risk: whether title to the goods passes from the supplier to you following full payment and at what point does risk in relation to the goods pass to you (i.e. once the goods have left the supplier’s premises or once they are unloaded/left in a safe place at your premises)?
  • Dispute resolution: if you are unhappy with the goods or the service provided by the supplier, what is the procedure for raising a dispute, and what are the remedies available to you?

How Do I Get Started As An Amazon Seller?

Setting up an Amazon business can be a very rewarding experience, but a lot can go wrong if you don’t do it right from the start.

Our expert eCommerce lawyers are ready to set you up and talk you through the best options for establishing and growing your store. 

Feel free to reach out to us at team@sprintlaw.com.au or contact us on 1800 730 617 for a free, no-obligation chat about setting up your Amazon business.

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