This is a guest post by Andrew Maff, Director of Marketing and Operations for Seller’s Choice, a full-service digital marketing agency for eCommerce sellers.
More and more, high-volume Amazon sellers are looking to expand into new countries to increase their overall sales revenue. The reasons behind this are two-fold. First, the Amazon sellers market in the United States is getting fierce. Consider that Amazon has over 50 million Prime members, each with an average spending of $1100 annually. That’s a combined market of over $55 billion, and everyone wants a slice of that pie.
Sellers are also looking to enter foreign markets because these new regions are wide open to products and goods from the US. There are a lot of high volume niches on Amazon’s European marketplaces that simply don’t have many sellers. By optimizing listings to create more visibility in search results, and by running effective PPC ads, US-based sellers can quickly attract new customers to their products.
So knowing why high-volume sellers are turning to places like Amazon Europe to expand their business is great, but now the big question is, how to get started. We’re going to cover four basic strategies that you should consider before selling your products into other markets. These will hold true whether you sell 100 units per month or 100 units per hour.
1. Identifying Potential New Markets
When you decide that you want to break into a new foreign market, the first thing you need to do is identify which ones will serve you best. After all, you can set up shop anywhere, but if you don’t sell anything, was it worth the time and effort you put in? Amazon Europe handles part of that for you, with five separate marketplaces: France, Germany, Italy, Spain, and the United Kingdom.
While Europe has several popular marketplaces such as Cdiscount, PriceMinister, Allegro and more, you still want to know where you should focus your efforts even if you’re only using Amazon as your storefront. That’s because you should be providing translations for your selected non-English speaking markets. Don’t let the language barrier deter you and keep you from those marketplaces.
2. Lost in Translation
When you do translate your listings into French, German, Italian, and Spanish, make sure that you hire someone who truly knows the language. Don’t settle for just translations. You want localization. That means someone who knows the language, the idiom, and can turn your listings into something that doesn’t read poorly.
After all, we’ve all seen and had a laugh at the bad translations that sometimes come with products that are made in foreign countries. While on the surface it is amusing, it can also lead to negative reviews or even outright returns, both of which are avoidable.
This is also the time when you need to do keyword research and run effective PPC ads. Don’t do your searches in English. You will need to do your keyword searches in the local language. Reach out to the freelancing community in the country you’re establishing yourself in, or hire a firm in that country to do the research for you.
3. Understanding VAT
One huge part of doing business in Europe is VAT. This is short for Value Added Tax, and operates essentially like sales tax in the United States. For example, the VAT in the UK is 20%. If you sell a widget for £100, then the VAT is £20. That means the overall cost for the consumer is £120. Of that, as the seller, you get the 100 pounds and you pay the other 20 to the British government.
You have to charge VAT if you’re going to be an FBA seller, because you will be storing your inventory in a particular country. For example, if your inventory is held in England, you have to charge VAT in England. You will also need to pay VAT if you’re storing your goods in one EU country, and then selling them into another country in the EU.
Because the VAT rate differs in each country, you may ask that Amazon use a fulfillment warehouse in Germany, where VAT is only 19%. Currently, Italy charges 22%, Spain charges 21%, and France charges the same rate as the UK.
If you aren’t sure about how to handle VAT, it’s best to hire a firm that specializes in it. That’s because failure to abide by the strict VAT laws will result in hefty fines and penalties. It’s much better to be safe than sorry.
4. Designing Fulfillment Strategies for Your Company
When it comes to overseas fulfillment, you want to go with Fulfillment by Amazon. While FBA may yield you exceptional results domestically, the extended shipping times and often exorbitant fees when it comes to shipping internationally will cut deeply into your profit margin. Instead, you can choose from one of three different FBA strategies.
The first is multi-country inventory (MCI), where your inventory is held and shipped from the individual countries. While this may save you some additional shipping fees, you will be responsible for multiple VAT submissions. You also have to ship your inventory to those individual countries, making for inherent logistical difficulties if you aren’t prepared for those challenges. You will get Prime delivery options, however, which can provide for increased conversions.
The second option is Pan-European, where you ship your inventory to a single fulfillment warehouse and Amazon allocates your product to different countries according to anticipated demand. This is essentially MCI, but with Amazon handling the distribution to different countries. Usually larger sellers use Pan-European, just because of the huge volume of product they ship. This saves on the extra costs of cross-border fees that come from having goods shipped from one country to the rest of Europe.
The last option, and the one that beginning sellers should take, is Amazon’s European Fulfillment Network. In this case, your entire inventory is stored in one country (usually in the United Kingdom) and shipped to all the other markets. This means you’re only responsible for VAT in one country, and more importantly, you’re still able to list your products in the other Amazon European marketplaces.
5. A Few Parting Thoughts
Before you start selling in other markets, you need to look at how your business is structured. If you aren’t running a corporation, any lawsuits or complaints will affect you personally. Setting up an LLC will allow you to separate yourself from your business, which protects your personal assets. Additionally, you’ll also be able to sell in restricted, or gated, categories. Incorporating is easy, but complex. Because of the differences in taxation between a sole proprietorship and an LLC, you should speak to a CPA or tax attorney to find the best solution for you.
Additionally, the time may come when you are ready to leave the Amazon selling infrastructure. That’s great, because there are a huge number of foreign-based marketplaces that can help you increase your profit margin.
In Europe, you have marketplaces such as Cdiscount in France, Bol.com in the Netherlands, Allegro, based in Poland, Finland’s Fruugo, and Germany’s Zalando. Each of these has their own requirements before you can use them, but if you can meet them, you’re in a great position to take advantage and increase your sales and exposure throughout Europe.
Expanding to other markets around the world makes sense, given how crowded the domestic Amazon marketplace is becoming. The more than $471 billion e-Commerce market in Europe has yet to suffer the same glut that the United States has. There are plenty of opportunities in high-profit niches for forward thinking entrepreneurs. With the right plan, you can follow in the footsteps of other high-volume sellers that have made the successful transition to these foreign markets.
Seller’s Choice provides uniquely personalized marketing and managed services for digital marketplace sellers, eCommerce merchants, and brand builders worldwide. You can learn more by emailing email@example.com or visiting here.