According to a study by Forrester Research, cross-border B2C e-commerce is expected to more than double to $629 billion by 2022. Who wouldn’t want a piece of that pie? By expanding your business to international markets, you’re able to access vast, new business opportunities and reach millions of potential customers who would’ve otherwise been unavailable to you. But expanding into the European Union and other foreign markets is a big move, and not one to make lightly.
Entering the EU means meeting entirely new foreign laws, taxes and product regulations. If you’re based in the US and considering selling to Europe, know that there are going to be a few hurdles to jump. Let’s take a closer look at a some of the questions you may have about expanding your sales to the European market, so you can be prepared to make your move.
With cross-border e-commerce rapidly expanding, Amazon is poised to explode. Globally, a quarter of the revenue generated by Amazon sellers in 2017 were through cross-border transactions — that’s up an amazing 50% from 2016. Based on estimates of Amazon’s total gross merchandise sales, this means $50 billion to $75 billion for merchants selling in other countries.
Even if you’re currently a small business, expanding into Europe will give you an opportunity to grow your business and increase your profits. But where do you start? Once you’re ready to explore your options, take the time to thoroughly research each market. Identify where there’s the most demand for your products, and be sure to understand what makes each market different. What are they lacking? What wouldn’t interest them? How do you have to approach the culture differently than you would in the US?
There will be differences between the American market and the European market. If you sell electronics, for example, you have to make sure that your product is even compatible. (As anyone who’s ever traveled to Europe before knows, you need a converter before you can plug in an electronic device or charger.)
The difference in voltage between America and Europe is a dramatic example. Yet, it’s important to understand the finer points of the culture, even in the UK where there are no language barriers. A great place to begin is by checking sales figures and competitors to see what’s successful and where the best opportunities are for your particular product.
So, you’ve done the math, surveyed the market and metaphorically stalked your competition. Now what? You need to get your products to your overseas market. You have a few options from Amazon. The first is Fulfillment by Amazon (FBA), meaning Amazon ships the products for you. The second is Fulfillment by Merchant (FBM), or shipping the products yourself.
If you choose to fulfill orders yourself, you’ve got a few options. You can ship the orders from your own warehouse or you can go through a third party, which is located in Europe. Pros and cons? Shipping from your own location often means high international shipping rates and import duties. Setting up a third party shipper will save the high shipping costs, but it also carries its own set of fees.
There’s one more important factor to take into account when deciding which of these options makes the most sense, and that’s Amazon Prime. If you choose FBM, your products will not be eligible for Amazon Prime. Just like in the United States, Amazon Prime requires using FBA. Cutting yourself off from Prime buyers can mean dramatically reducing your global sales opportunities.
When using FBA, you’re given three storage options: Pan-European FBA, European Fulfillment Network (EFN), and Multi-Country Inventory (MCI):
For most US sellers, it makes the most sense to store your inventory in the UK to avoid running into a language barrier. Trying to set up your European sales can be confusing enough without having to worrying about finding a translation service to help you fill out the paperwork. Amazon UK makes a great starting point for expanding into Amazon EU.
Once you’ve properly registered your business, you can set up your European Unified Account with Amazon. Setting up this account comes at a small fee but it allows you to list your products in all 5 Amazon marketplaces in Europe.
Simply put, a unified Amazon account allows you to control what products you sell, and what countries you sell your products in –, all from one Amazon seller central account. You only have to set up your account on one of the five EU marketplaces, you’ll be automatically enabled to sell across all five marketplaces.
A great tip for English-speaking Americans: The registration will be in the native language of the country where you register. So, choose to register on Amazon.co.uk.
Prepare for VAT When Selling on Amazon EU
When it comes to VAT registration, you’re required to register in any country in which your merchandise is being stored. The VAT taxation system is very different from what American sellers are used to. VAT doesn’t just have to do with the country where your products are sold. For this reason, that you also need to consider your storage options very carefully.
You’ll need to meet a few requirements in order to pay VAT obligations of selling in EU…
After you’ve listed your products and they start selling, you’ll start receiving payments in British Pounds or Euros. That’s because Amazon makes each marketplace a native selling experience. Your customers will pay for your products in their currency, and you’ll be paid in that currency not in US dollars. In order to receive your earnings in US currency, you’ll have to convert your earnings from Euros to dollars or Pounds to dollars.
In all likelihood, you’re going to want to bring that money back home in US dollars. This is where many businesses selling internationally from the US are losing money. Many sellers don’t fully understand they have to convert their earnings into US dollars, and they’re often unaware that the process of converting their money is even taking place.
So, how does it work? Once you have a balance in British Pounds or Euros in your Amazon account, you can use Amazon Currency Converter to change your earnings into US dollars. It’s sort of like exchanging your money at the airport when you’re in a foreign country, Amazon makes it super fast and convenient.
Also like changing your money at the airport, Amazon Currency Converter probably isn’t going to give you the best exchange rate you can get. Amazon Currency Converter rates have been measured as high as 4.5%. Imagine having 4.5% taken off the top of your profits? In order to receive the most competitive exchange rate, you’ll probably have to shop around. Learn more about cross-border payments, and how to negotiate the best rate.
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