VAT for an online marketplace

Discussion in 'Ecommerce Forum' started by Unai, Apr 9, 2019.

  1. Unai

    Unai UKBF Newcomer Free Member

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    Yeah, I have thought about this. These three original memberships I was talking about were the basic ones. I do have in place like advanced ones for each category. Each upgrade comes with more features, like analytics for your shop or the ability to create profiles (and configure their capabilities) within your shop and assign them to employees - so there could be normal employees, managers etc.

    Each one of these upgrades comes with a bigger product limit too. The problem is that I don't really have a concept of how many products does your average online shop sell on a regular basis, so the numbers I have on them right now are pretty much random. I don't know if a 100 is a lot or not, you know?

    I need to do some research about this and think about a strategy. I can easily charge sellers per product. Or just per product if above certain limit. Or I could charge them a fixed price per month in exchange of X limits (or unlimited). Etc.

    I do have the flexibility to pretty much whatever I want. What I don't have are easily available references to see and decide what to do.
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #21
  2. Scalloway

    Scalloway UKBF Legend Free Member

    14,801 3,151
    Why don't you start a small scale version of the business to find out how to solve some of the practical issues?
     
    Posted: Apr 10, 2019 By: Scalloway Member since: Jun 6, 2010
    #22
  3. Mr D

    Mr D UKBF Legend Free Member

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    Not sure there is an average.

    With my previous business we probably had in excess of 3000 SKUs and sales between 5 and 25 grand a month at its peak.
    That is UK sales.

    Using sites with millions of buyers. What you will not have to start with is buyers.
     
    Posted: Apr 10, 2019 By: Mr D Member since: Feb 12, 2017
    #23
  4. kulture

    kulture UKBF Legend Staff Member

    7,893 2,147
    Winding back to your original question. Your terms and conditions need to be written by a commercial solicitor. They need to cover all eventualities and be legal. For this to work you need to make clear that the sale is between the customer and the retailer, you are just the agent. The responsibility of including VAT or not on the sale price, and collecting VAT and giving it to HMRC should be the retailer. The responsibility of producing a VAT invoice should be the retailer. You should collect the money, take off your commission and pass it on to the retailer, not worrying about any VAT element.

    The problems I see for you is fraudulent retailers, fraudulent customers, normal chargebacks, refund requests.

    What happens if a customer requests a refund after say 30 days? How do you check that the product has been returned. Who funds the refund, how do you get the money from the retailer? If there is a chargeback and the money thus comes from you, how do you recover it? If a retailer sells 100 i-phones (say) and does not ship any, and you do not find this out for 15 days (i.e. after you have paid the retailer) then how do you recover from this?
     
    Posted: Apr 10, 2019 By: kulture Member since: Aug 11, 2007
    #24
  5. Unai

    Unai UKBF Newcomer Free Member

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    Yeah this is gonna be tricky to handle. The system that I have now is that every time an order is marked as "Completed" by a vendor (so ordered, shipped and received by the customer), that order is marked as "Ready to be paid" on my back-end. Then, after X time (X being a reasonable amount of time to wait for refunds requests etc), if there are no problems, I transfer the money for the order to the vendor.

    Both vendors and customers can request refunds within this threshold. For that they have to click in the order (they have a tab with all their orders, status of the order, SKU of the order, address shipped for etc) and request a refund for it. So, every time a refund is requested I will know which order it belongs to, and I can reach out to the customer if I want to (to make sure that the request is legit). The same goes for the customer refunds.

    After that threshold, no refunds will be allowed. That will be both in my terms of service (as a provider for vendors) and on the policy tab for each vendor's shop (they will have to have one). That way the refund threshold will be the same for everything, making it easier.

    Besides that, customers have an enquiry button. This button is on each items' page (along with like the description, general info etc), and also on each shop's page. I will make sure to let customers know that if they have any queries or problems about a product then they should contact the seller directly by using this button (a pop-up will appear for the seller when this happens, and they will also receive an email) since I am not the one providing the items etc.

    I intend this to help me managing these kind of requests and problems. I do think that it's a fairly safe system, but it can be potentially demanding time-wise and require a lot of micro-management.

    Also, I can see every single item ordered on a single page from my back-end. There I can see their shipping status, along with everything else. Online sellers are actually required by law now to disclose to customers how much time will the shipping take, and this amount of time has to be a reasonable one. So I can check the orders from time to time, and if I see that one of them is taking too much time to get shipped, I will contact the seller. I will also let know customers that if their orders are taking an unreasonable amount of time to arrive, then they can contact me and I will ask around to see what's happening.

    Now that I think of it, it makes much more sense for the refund threshold to be at least a month. Just in case, to give room for mistakes and whatnot.
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #25
  6. Unai

    Unai UKBF Newcomer Free Member

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    UK is as small as I can make it. I mean, I could restrict the website to just a city if I wanted to, for example, but configuring it for that would actually be pretty difficult and time consuming. I honestly think that launching it in the whole UK will be easier.

    Besides that, I really don't know how I could make it smaller. Aiming for just one group of vendors, I guess. But which one? And would it be worth it?
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #26
  7. Mr D

    Mr D UKBF Legend Free Member

    14,430 1,573

    You can ban buyers and sellers. You cannot restrict refunds - the buyers have the right to return goods for a refund in many circumstances. If some bloke buys 25 wedding dresses and wants to return all 25 then you cannot stop them.
    You have to meet legal minimums for return time periods, you can go beyond that (or let the seller go beyond that).
     
    Posted: Apr 10, 2019 By: Mr D Member since: Feb 12, 2017
    #27
  8. Mr D

    Mr D UKBF Legend Free Member

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    Part of the problem is your marketing to all sellers and all buyers will be huge.
     
    Posted: Apr 10, 2019 By: Mr D Member since: Feb 12, 2017
    #28
  9. Unai

    Unai UKBF Newcomer Free Member

    19 0
    "Online, mail and telephone order customers have the right to cancel their order for a limited time even if the goods aren’t faulty. Sales of this kind are known as 'distance selling'.

    You must offer a refund to customers if they’ve told you within 14 days of receiving their goods that they want to cancel. They have another 14 days to return the goods once they’ve told you.

    You must refund the customer within 14 days of receiving the goods back. They don’t have to provide a reason."

    This is from a government page about accepting returns on online selling. There is a bunch of other useful stuff too. So yeah apparently 14 days is the minimum threshold for requesting refunds as a customer. So in my case that would mean that customers have at least 14 days after the arrival of the item to request a refund. They request it and I receive the request (and so does the seller). The customer sends the item back to the seller by whatever system the seller has in place. The seller receives the item, then requests the actual refund from me if the seller does not want a replacement. If the customer does want a replacement, then I don't have to refund the seller since the amount would be the same (assuming that the customer wants the same item again).

    The seller would have some extra expenses because of the shipping etc. sure, but that's not really my fault.
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #29
  10. Unai

    Unai UKBF Newcomer Free Member

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    I have a to-do list for my marketing plan (or attempt of a plan). One of the points look for already existing sellers using Amazon, Ebay, Etsy etc. that sell the kind of things I want my website to be about. Compile a list with contact emails etc. Then reach out to them, explaining what I want to do and stuff like that. Tell them that since I'm just starting and I need sellers willing to use an unkown platform, I will be offering an "Early Bird" (name to be determined) membership for the first, say, 100 sellers that set up a store with me, and that I won't be charging them commissions for the first couple of months or whatever.

    Both as a marketing strategy (it's in their best interest to at least attempt to lure customers to the platform to make more money because of the no-commission thing) and for testing purposes, since I actually need experience handling the practical side of the project.

    I will still be charging a small amount of money to cover the fees for transfers etc, but that's about it. Just so I don't actually lose money.
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #30
  11. Mr D

    Mr D UKBF Legend Free Member

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    Make very sure of your terms and conditions. Most of all, enjoy. Succeed or fail this project will have an impact on you and cause you to develop new skills.
     
    Posted: Apr 10, 2019 By: Mr D Member since: Feb 12, 2017
    #31
  12. kulture

    kulture UKBF Legend Staff Member

    7,893 2,147
    You have to understand that there are legal obligations to refund after the 14 days in certain circumstances. There are also chargebacks which the customer will initiate and you will be powerless to defend in many circumstances so you could very easily be in the situation where you have to give out a refund long after the seller has the money.
     
    Posted: Apr 10, 2019 By: kulture Member since: Aug 11, 2007
    #32
  13. mattk

    mattk UKBF Newcomer Free Member

    1,692 700
    What is your reasoning for collecting payments yourself, rather than allowing buyers and sellers to transaction directly? You seem to be leaving yourself massively open to refunds and chargebacks at your expense.

    eBay have been fine tuning their marketplace for a decade, therefore I'd suggest they know a little bit about what they are doing. Copy them!
     
    Posted: Apr 10, 2019 By: mattk Member since: Dec 5, 2005
    #33
  14. Unai

    Unai UKBF Newcomer Free Member

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    I know. It is what it is. If that happens because, say, a vendor is being shady or dishonest when describing a product or something like that, then I can take steps to get my money back.

    Vendors make money out of the website (in theory), so it is in their best interest to keep me on their good side. So if they don't behave, I can ban them. And since they will be just a relatively (in comparison to customers) small amount of them, it will be easy to keep track of them and carry out checks.

    Customers on the other side are trickier to handle. I could be banning the same customer over and over without me knowing it if they are using different emails, for example. I will have to think hard about a way to minimize risks regarding this matter, that's for sure. But for now I can't really think of anything else besides the systems and steps that I already have in place.
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #34
  15. Unai

    Unai UKBF Newcomer Free Member

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    I have thought about this hard. The thing is that Ebay is massive. It has the resources to carry out all the necessary checks to ensure that everyone is behaving and paying etc. All the infrastructure, software and people to do it.

    In theory, it would be easier for me to allow customers to pay vendors directly. But that would give vendors a lot more flexibility if they want to be ****s. Same for customers.

    Taking care of the payments is a burden, honestly. But I think that holding them "hostage" would give me the upper hand when dealing with idiots, especially since I just don't have the resources to keep everyone on check.

    So my reasoning is basically that if I control the money, then people will want to behave.

    I could change this fairly easily. PayPal and Stripe have a split pay thingy for these kind of situations. This would mean that a customer would pay two "bills" when purchasing a product: The commission for the vendor (the vast majority of it) and my small commission. There is more to it than that, but I'm pretty certain that I could figure it out.

    This cannot be done (or I haven't found a way to do it yet) with bank transfers. So if a customer wants to pay by bank transfer, then THAT money would definitely have to go to the "shared" wallet that I would be controlling and disbursing. Not sure if this is a huge deal since no one uses actual bank transfers to pay for stuff anymore, it's all either card (Stripe), PayPal or equivalent.

    I will give this matter thought. Maybe I will decide to just split the payments directly, I don't know. There are other things that I have to take into account if I want to do that, so we will see.
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #35
  16. Mr D

    Mr D UKBF Legend Free Member

    14,430 1,573

    You can take steps to try getting your money back.
    Time, effort, and may still not pay.

    Vendors will know you make money off of them so its in your best interests to keep on their good side. You can ban them, they can take their business elsewhere.
     
    Posted: Apr 10, 2019 By: Mr D Member since: Feb 12, 2017
    #36
  17. Unai

    Unai UKBF Newcomer Free Member

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    Fair enough. So you think that having a split payment system would be better? Meaning that the money would go directly to the vendors (and to me as well) with every single purchase, instead of sitting there waiting for me to pay people back.

    I would have to change the refund system for that. Right now, it forbids to request payments from orders that have already been paid to the sellers. So with a split pay system, every single order would be marked as "paid back" since that would be automatically done.

    Not sure why, but changing that little thing is much more difficult than it sounds, so I will have to think hard about cons and pros before deciding anything.
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #37
  18. mattk

    mattk UKBF Newcomer Free Member

    1,692 700
    I would say the complete opposite. YOU need all the processes in place to ensure customers are paying properly and sellers are supplying goods, as if there are any problems you will lose out.

    eBay delegates all the payments to a third party (usually PayPal) and simply invoices sellers for the eBay fees on a regular basis.

    How are you going to handle credit card chargebacks after you've paid the seller for example?

    Have you also thought about whether sellers are going to be happy not receiving payment for 14 days, even though they need to buy stock, stationery, incur postage costs etc.?
     
    Posted: Apr 10, 2019 By: mattk Member since: Dec 5, 2005
    #38
  19. Unai

    Unai UKBF Newcomer Free Member

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    It seems that everyone thinks that a split pay system is better than me holding the money and disbursing it. I can see why.

    I would't be taking care of the actual money transactions - I'm using Stripe and PayPal gateways for that. So any transaction would go through them (or the bank, if you choose a bank transfer as your payment option).

    Having a split pay system would save me from transferring the money to vendors, refunds (vendors would in general handle this unless I need to intervene), chargebacks and also saving vendors the waiting.

    Yeah, I think I will probably go with that after all. It's gonna take me a while to accommodate the website for it, but it can be done.
     
    Posted: Apr 10, 2019 By: Unai Member since: Apr 9, 2019
    #39
  20. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    10,276 2,083
    Not clear if you taking the money is the seller or the supplying company, but the fit for purpose in trading standards do not normally have any short term limits, so a tv could go wrong after say two years and be sent back to you to sort out a repair of refund whilst a car fault might be as long as 6 years ( I got a repair done on 5 years 10 month by Land Rover two years ago

    Suppliers are so easy to get if you are cheap, but probably the wrong type of supplier, Marketing as others have stated is both expensive and time consuming, and from what you have stated so far, I am sorry but its completely a no runner in its present form, you need to spend another 750 hours on just the marketing and consummer regs
     
    Posted: Apr 10, 2019 By: Chris Ashdown Member since: Dec 7, 2003
    #40