Each market has limited growth opportunities and you know that. There comes a time when you ask yourself: “How can I scale my online business even more? How to increase my sales and grow my company?“. You ask Google, and one of Google’s answers is: “Tap into other markets”. This is probably one of the most common tips and methods when it comes to growing your online business.
Why to expand within Europe and not intercontinental
But why should you expand to other European marketplaces when there are other markets that are bigger than the ones in Europe? First of all, Europe is a great region to expand to because of its mature economy and its size. Second, the European marketplace is also culturally close to yours and also well covered by Amazon. So considering Europe as an integral part of your business can strongly increase your sales. And Amazon makes it really easy for sellers like you to tap into other European marketplaces. You can reach a huge audience of consumers who are already used to buy on Amazon, simply by using Amazon’s existing infrastructure within Europe. So if you do it right, you can profit from a growing market. The expected annual turnover in B2C Ecommerce in Europe will hit 621 billion EUR in 2019, while the turnover in 2013 was only 279.3 billion EUR.
Over time, Amazon has established big marketplaces in five European countries that can help you to reach up to 27 countries within Europe. A big advantage you get: With an EU selling account on Amazon you are able to sell in multiple marketplaces from a single account: simplifying listing, pricing, fulfillment, and getting paid. When you sign up to sell with an Amazon Europe Marketplace Account, your seller account is automatically enabled to allow you to sell on all Amazon EU marketplaces:
Using Amazon’s European FBA services and getting your goods to Amazon warehouses across Europe to ship them from there provides a better customer experience by faster shipping. Use Amazon to store and ship across Europe, as well as handle customer support and returns.
In summary, there are 3 main reasons why you should expand to Europe:
- Reach millions of additional customers: Amazon’s European marketplaces help you selling across 27 countries.
- Diversify your revenue stream: Strengthen your cash flow. Protect yourself from sales fluctuations on one specific marketplace and take advantage of European holiday seasons and peak sales periods of the different marketplaces.
- Let Amazon handle the details: Leverage their state-of-the-art logistics, powerful tools, and world-class customer service to simplify international selling, so you can concentrate on expanding your business.
Where should I expand to first?
A legit question to ask yourself is what should be the second country in Europe you start selling to since not everybody wants to start selling in all marketplaces from the beginning. Choose where to expand to based on your individual situation, taking into consideration your product category, resources and other factors.
In general, it makes sense to consider the biggest marketplaces first as you can expect the biggest growth for your business in those markets. Germany and UK are good options to start with. Many sellers expanding to Europe from the US marketplace start in the UK, since both marketplace languages are English. A common initial entry strategy involves sending inventory to a UK fulfillment center. Then, you can use the BIL tool to translate and synchronize your listings to start selling in the remaining marketplaces, using Amazon’s European Fulfillment Network (EFN), which will automatically fulfill orders across all five marketplaces using your single source of inventory in the UK. When you’re ready, you can then explore other fulfillment options, such as Multi-Country Inventory and Pan-European FBA.
It could also make sense to store your goods in the Czech Republic or in Poland, if you already have established the expansion to the German marketplace. Benefit from €0.50 savings on shipping through Amazon fulfillment fees per unit shipped from your German inventory (stored in Germany, Poland, and the Czech Republic). You can also take advantage of three additional logistics centers with state-of-the-art technologies and round-the-clock operation seven days a week and faster delivery to a growing customer base in Southern and Eastern Germany and Eastern Europe through strategically positioned logistics centers in Poland and the Czech Republic. Besides that, benefit from an increased shipment efficiency, as incoming shipments only need to be sent to one logistics center.
The European Fulfillment Network allows you to store your goods in different fulfillment centres within one country from which your local and trans-border orders will be fulfilled. You can sell to all marketplaces through EFN, even if you store your goods in only one country. EFN is a great start for businesses who want to benefit from Amazon’s infrastructure and that don’t want to store their goods in several countries. Read more about EFN here.
With the Central Europe Programme you ship your FBA inventory to a warehouse in Germany, then Amazon handles the distribution to Amazon’s fulfillment centers in Germany, Poland and the Czech Republic at Amazon’s discretion. There are no additional FBA fees to use this service. This program implies that you are VAT registered in those 3 countries. The biggest benefit is the money you save, namely 0.50 € of the fulfillment fee for every unit you sell from Germany, Poland or the Czech Republic. Further, you ensure faster delivery time. Still, keep in mind that you need a VAT number in all 3 countries. Read more about CE here.
PAN EU allows Amazon sellers to send their goods to a warehouse and Amazon distributes them internally to all its warehouses free of charge. Customers benefit from faster shipping times and the retailer only pays local shipping charges. Those sellers who also sell in the USA already know this system. It is another step from Amazon towards a global logistics provider. Read more about PAN-EU here.
Challenges that come with an expansion within Europe
Although it is quite easy to expand within Europe with Amazon, there are some challenges you still have to deal with when expanding your business within Europe:
- Deciding what to sell: You’ll need to understand whether your product is appropriate for that country on the one hand, and on the other hand you need to check if there are potential customers for your product in that market. First and foremost, make sure you comply with all laws in each country and to match the product standards in each country.
- Dealing with other European languages: Amazon requires that listings and customer support are provided in the marketplace’s local language.
- Handling value-added tax (VAT): Every European country has tax requirements for sales of products to customers. As a PAN European Amazon seller you need five sales tax numbers. (DE, UK, IT, FR, ES).
What is value-added tax (VAT) and how to handle it?
VAT stands for Value Added Tax. It’s a consumption tax that applies to all goods and services that are bought and sold for consumption in the EU. VAT is collected from the buyer at the point of sale and is individual for each European country. As a seller, you are required to forward this VAT payment to a country’s revenue authority on specific dates. So when you import goods into the European Union, you’ll need to comply with the customs laws. If you store or sell goods to customers within the EU, you may be required to register for VAT in that country.
Important: Each Amazon seller is solely responsible for being VAT compliant!
Really make sure to be tax compliant, since you will have to pay a financial penalty if you didn’t register for VAT when you had to and the tax authorities became aware of that. The amount of the penalty will typically depend on the amount of VAT due and the length of time you failed to meet your registration obligations. Late registration penalties are generally a percentage based on the VAT amount that should have been remitted to the tax authorities.
In addition to that, Amazon receives a confirmation by the tax authorities that you have failed to stay tax compliant so they will have to de-list you from the Amazon marketplace and you will be prevented from re-listing your goods until you are VAT compliant again. In any case, try to avoid this scenario in order to not harm your business.
Getting started selling across Europe is a serious undertaking that can pay off in sales by reaching millions of new customers.
In order to stay VAT compliant, it is important to fully consider all regulatories and talk to experts to evaluate your individual situation. hellotax helps you to stay VAT compliant in all European marketplaces. We offer VAT Registrations and also VAT Returns & Filings to online sellers. Feel free to book a free consultation call with one of our VAT experts.