When you’re a successful Amazon seller, you naturally want more. The next stepping stone to grow your Amazon sales may be expanding to new markets. For American sellers, that often means setting up shop on Amazon UK and the European Amazon marketplaces of Germany, France, Spain, and Italy.
Yet every new market comes with its own unique circumstances, and by that we mean costs. In this post, we’ll look at three major kinds of fees and costs associated with expanding your business to Great Britain and the EU, and smart ways you can get those costs down.
Amazon makes its money by taking a cut out of every sale you make on the platform, as well as charging for all the services associated with processing and fulfilling online orders. Every seller using Amazon FBA in Europe and the UK is subject to at least these 3 main types of fees:
Storage fees on European Amazon marketplaces are charged based on how much space your inventory takes up in an FBA warehouse. The fees are also charged on a monthly basis.
In the UK they’re calculated by cubic foot, and in the rest of the European markets they’re calculated by cubic meter. The actual amount you’re charged varies by these factors:
– Size category of the item (standard or oversize)
– Time of the year (Fees increase every year during the 4th quarter due to increased volume of incoming shipments into the warehouses during the holidays)
– The length of time an item has spent in an FBA facility. If an item spends one year or more in an FBA facility, then there’s an additional monthly fee charged per item for every month it stays in storage.
Amazon fulfillment fees are charged for a variety of services related to getting your orders fulfilled, like handling, shipping, packaging and returns. Amazon charges per unit of product. The fees are applied every time an item needs to be moved – basically, whenever a sale happens. (There are exceptions like removal orders and returns.) Products are divided into categories based on size and weight, each category falls into a pre-determined fee bracket.
Amazon fulfillment fees in Europe have undergone changes in 2019. Not only do they vary in size, they also vary in the type of fulfillment. The fees are different if your orders are being fulfilled locally (meaning within the country your FBA facility is in) or across borders.
When selling in Europe you have several options in terms of storing your inventory and fulfilling orders:
– European Fulfillment Network EFN (all products stored in one country)
– Central and Eastern Europe CEE (products stored in Germany, Czech Republic and Poland)
– Pan-European PAN-EU (products stored in all 7 European FBA warehouses)
Amazon referral fees work the same way on Amazon EU as they do in the US. When you make a sale and it’s time for Amazon to take its cut, they’ll charge you a referral fee. It works like this: A customer orders one of your items, and a percentage of the total sales price they pay for the item is subtracted as a referral fee.
Amazon EU referral fees are, in most cases, 15% of the total sales price. However, there are exceptions in certain categories. In some Amazon selling categories, the fixed percentage may vary. In other Amazon categories, there may even be a dynamic aspect to the way seller referral fees are calculated. Check different categories and price points for your products to ensure you’re minimizing referral fees on Amazon EU and Amazon UK.
The European marketplace comes with its own unique circumstances, arguably the most significant one for Amazon sellers is dealing with VAT (Value Added Tax). To put it simply, VAT is a tax that’s added at every instance of value being added in a supply chain. The VAT in Europe can range from 17% to 27% depending on the country.
Once your inventory touches the ground and enters the borders of any country where your FBA warehouse is located, you’re expected to pay VATs on the declared amount of the cost of goods you imported. The same principle applies when you’re using FBA to store and fulfill your orders.
You might be asking yourself, how and why do you have to register in one or multiple countries? It depends on how many sales you’re generating in a single market outside of the country you’re registered in.
Once you go over a certain threshold, you have to get VAT registered, the thresholds vary from country to country:
VATs are submitted at different periods depending on the country you’re selling in, it’s either monthly or quarterly. You need to make sure that you file your taxes and returns at appropriate times. Once you submit them, you’re generally expected to pay via bank transfer within two weeks.
Remember you’ll need to pay in the local currency of each government you remit VAT payments to. For example, if you’re paying UK VAT taxes, you’ll need to pay HMRC in pounds. That means if your bank is in the US, you’ll also have to pay currency exchange fees. Check the fees at your bank before you wire money. You may also want to investigate using a global currency account to pay your VAT, which can be cheaper.
Just make sure you understand the fees involved with exchanging currency, so you can compare costs. Ping Pong is a service that allows you to make cross border payments at the lowest conversion rates available, so that Amazon sellers can keep as much of their earnings as possible. You can request a free rate comparison to see how much you can save with a global currency account.
Selling on foreign Amazon markets means you’ll need a way to transfer currency into US dollars. Amazon Currency Converter allows you to receive payments in your own currency regardless of the currency the payment was received in. So if you’re selling on Amazon UK, then your payout will automatically be exchanged from pounds into US dollars.
If this sounds convenient – it is! However, there’s a substantial tradeoff most sellers aren’t aware of. The rates Amazon uses to convert currencies are among the highest on the market. Amazon’s currency exchange fees can be around 3.5-4.5%.
Not to mention the fact that you have to make your VAT payments in foreign currency. If you’re using Amazon Currency Converter, that means you may have to pay for currency conversion twice! Here’s how it works: Amazon Currency Converter automatically exchanges your payouts into dollars. Then when you go to pay your VAT to the German government, for example, you have to transfer your US dollars back into Euros. That’s double foreign exchange fees!
This only goes to show that being diligent with currency conversion and paying close attention to costs can greatly help your Amazon business succeed in the complex European landscape. A global currency account is one of the most effective ways to simplify selling on Amazon European marketplaces, pay VATs, make payments to suppliers, as well as avoid certain costs of converting your earnings.