Just like any average person, I wanted to earn extra income to pay for my daily expenses, and because of this, I tried out my first business online: an eBay arbitrage business. How does it work? Well first, I look into what products my country has high demand. With this, I go to the eBay website of other countries like United States of America (USA) and United Kingdom (UK) and look for a supplier who sells the same product, but for a lower price. Since the demand in Australia is high, I have the option to order in bulk to get a better discount as well!
This idea was so exciting! My small business was growing, and everything was going well. It was honestly really fun to do especially thinking about the income I'll earn back after re-selling the products. But unfortunately, I was wrong.
In doing the product research, I found a particular hair care product for women which had a massive demand in Australia. I looked into eBay US and eBay UK, and I found a reseller who sold it for a lower price! With the excitement that I had, I ordered $5000 worth of products with the intention of reselling it in Australia and getting great deals out of it. However, I accidentally skipped one tiny little step in the process.
What Went Wrong?
Apparently, I wasn't able to take into account the miscellaneous fees that are needed to import certain products from a different country. I wasn't able to research as much about the importing of goods, so it became a little bit tough for me.
When the products reached the border, of course like any other item, it got stopped because it had to go through required inspections and clearances. This rule is understandable so that the Australian government is aware of the products that go in and out of the country, so I willingly agreed to this.
In my case, I didn't know that when significant amounts of goods get shipped to the country, I would have to pay a large amount of GST (Goods and Services Tax). The GST was an additional 10% to be paid to the Australian government, and for me, it wasn't a big deal because 10% is technically small compared to the profit I'll be gaining from the shipped goods.
However, there's more! Besides this, I also had to pay an extra 5% because of a tariff. For those who don't know, a tariff is a specific tax or amount that needs to be paid when importing or exporting products.
All of this hassle and expenses happened because I failed to do proper research before venturing on this e-commerce business.
In total, I had a 15% increase in my costs which I wasn't able to account for because I didn't think it through. To make matters a little bit worse, I was also required to pay the Customs Clearance Agent, meaning the person who did the service of getting the clearance for me and having it delivered to my address.
The Learning Process
To cut a long story short, I made no money, and I lost it all due to the fees required in the shipping of goods. If you think about it, for big companies and corporations, $5000 doesn't seem like a lot, but for small businesses like me, it was devastating. Because of this, I had to sell all of the goods, and the income I got was not enough to compensate the money I lost from all the taxes and fees I had to pay to get the job done.
For a first-timer in the online business world, it was indeed a memorable lesson to learn.
But despite this, I'm still really thankful for the bad experience because I learned a lot! The experience was devastating not because I didn't want to follow, but just because it could
have been given a solution only if I had done my research and knew my numbers accurately. I was too naive for the situation, but it moulded me into a better person.
After what had happened, I realised that I didn't know my numbers that well before. By numbers, I mean important values that were needed along the processes: the capital, the profit, the taxes,
the service fees, and all those.
Fast forward to today, I know that the situation became an essential learning experience because it's now instilled in myself to do research and calculate the costs and benefits of every action and transaction I make. That's one crucial factor especially for people who want to go into the business world.
This important lesson doesn't just apply in selling products but can also be manifested in marketing services too. Make sure that you can calculate costing well and know the ins and outs before importing, or anything in general.
The bottom line of the whole experience is: know what you're going to get into. Don’t be too impulsive in making decisions, and think twice before doing something. Remember to research, know your numbers, and be informed about the ins and outs before it turns into a regret of a lifetime.