No matter if you already have a successful Amazon business abroad and want to expand to the European marketplaces, or if you’re new to the E-Commerce industry and want to start your Amazon business in the EU, 2021 is a good time to start selling on Amazon in Europe.
If you are excited about your expansion, there are still a few things you need to take care of before you can start selling:
- Market and customer research
- Choice of fulfillment method
- Registering and fulfilling legal obligations
- Import and list products for foreign customers
- Think about regular VAT duties
In this article, we will cover all the things you need to know and offer a step-by-step guide for selling on Amazon Europe.
1. Research the marketplaces and customers
Before you start buying products or register your business, you first need to research the marketplaces and it’s customers in depth. This is necessary because the customers differ from marketplace to marketplace, even though all of them can be serviced through one Amazon EU seller account.
As the languages change, so do the needs and wants of customers. Some product groups might be readily available in Germany online and offline but are in big demand in Spain, or the other way around.
It’s also important to take into account the other businesses active on Amazon. While all marketplaces can be accessed with one European seller account, not many small businesses take advantage of this opportunity. Market gaps can therefore differ from country to country.
Lastly, the products you will later sell determine the VAT rates applicable. The VAT rates also change depending on the market and country and can therefore influence the bottom line and impact your profits.
2. Research fulfillment methods
Another reason to pay close attention to the products you buy, import, list, and sell are the fulfillment fees Amazon charges you for selling and shipping your products.
While you can take care of your fulfillment without Amazon being involved and choose FBM Fulfillment, you might want to consider using an Amazon fulfillment program, especially if you are a foreign Amazon seller.
There are three main options for FBA fulfillment to choose from in the EU:
- Amazon Europe EFN (European Fulfillment Network)
- Amazon Europe MCI (Multi-Country Inventory)
- Amazon Europe PAN-EU FBA
All of these programs charge different fees for different product categories, shipping methods, and storage locations. When choosing products to sell on Amazon Europe, you should research the additional costs and put them into consideration.
First of all, FBM Fulfillment or Fulfillment-by-Merchant means that Amazon is not part of your distribution chain. You either ship products directly to your customers or employ a third-party fulfillment provider.
Choosing FBM can make distribution easier and cheaper and is a great way to test the market if you are new to the European marketplaces.
However your products will also take a longer time to arrive at your customer’s doorstep, giving you a disadvantage in today’s fast-paced E-Commerce environment, and they will not be eligible for Prime, which can improve the visibility of your products on the Amazon platform and therefore serve as a Marketing Tool.
2.2 European Fulfillment Network
Using the EFN lets you choose one Amazon distribution center in Europe to store your products in.
While this program comes with Prime eligibility and gives you the opportunity to sell to customers all across Europe, shipping will still take longer, as products are only stored in one single location.
You will also be able to save on storage fees, since you are only using one warehouse, but have to consider cross-border shipping fees.
2.3 Multi-Country Inventory
You can save on those cross-border fees when using the MCI. In this program you can choose exactly where you want your products to be and select warehouses in multiple counties.
While this Amazon FBA program gives you lots of options and control, as well as faster shipping due to proximity to your customers, it can also be overwhelming to control your entire inventory – especially for inexperienced sellers.
2.4 Pan-European FBA
Lastly, the PAN-EU program offers the same spontaneity that the MCI does, but takes the distribution out of your hands.
After you send your inventory to one of Amazon’s distribution centers, Amazon will then redistribute it to different locations based on expected demand.
This should decrease your storage costs as there is a higher turnover of inventory and shorter storage times. However, the fees for fulfillment and shipping might also differ from the previous two FBA options.
3. Open your business and take care of VAT obligations
Once you have an overview over your chain of distribution and product portfolio, it’s time to make your Amazon business in the EU a reality.
There are three registrations you need to finish before you can legally start selling items on the European marketplaces to customers:
- Business registration
- Obtain EORI Number
- Obtain VAT Identification Number(s)
3.1 Business registration in Europe
First and foremost, you need to register your business in Europe. This means that you choose a country with the least language and cultural barriers or the best opportunities and open an E-Commerce business there.
You will later have to fulfill regular legal obligations in this country, so it is important that you either find a trustworthy representative, or make sure you can take care of your obligations in the country’s language by yourself.
3.2 Obtain EORI Number
Once you have registered your business, you need to obtain an EORI number, or Economic Operator Registration and Identification Number, in your business’s home country.
This number is used to import products into the European Union and is applicable EU-wide, which means you will only need to acquire a single EORI number in one country.
3.3 Obtain VAT Identification Number(s)
You might however need to acquire several VAT IDs. Those can be obtained by registering for VAT in an European country.
You are required to register for VAT in any country you B2C distance sell to if your turnover crosses the EU-wide annual threshold of €10,000.
Alternatively, you can register for the One-Stop-Shop, or OSS, in your business’s home country. In this case, you no longer have to register in all countries because you will fulfill all VAT obligations in that country.
Independently of these regulations, you also have to register for VAT in any country you are storing your goods in. If you participate in one of Amazon’s FBA-programs, your products may be stored in a variety of countries and you have to register in all of them.
If you are confused about the VAT responsibilities that come with running an Amazon Business in Europe, you might consider the help of specialized VAT service providers, like hellotax. They can advise you about the different options available and can register you for OSS and VAT in several countries with the help of several specialized tax accountants.
hellotax currently also offers an expansion package, that supports you in every step along the way, and offers a VAT automation tool, that makes paying VAT and regular filings in several countries much easier.
4. Import products & Start listing
Once your E-Commerce business officially exists in the EU, you can start importing and listing your products on your Amazon Europe Seller Account.
If you already have an existing Seller Account it can be connected to Amazon Europe. However, the requirements for identity verification and data protection differ, which is why you need to set some time apart to adjust your account.
At the same time, you can start importing products using your EORI number. Choose items on B2B platforms like Alibaba, or get your own manufactured products ready to export. Then import them into the EU, ideally via the country in which they will be stored by your E-fulfillment provider or the Amazon fulfillment program.
For the importation process, you will need a legal representative on the ground in the country of import. The expansion package offered by the VAT service provider hellotax mentioned above also includes an introduction with a professional English-speaking customs agent who can support you in this process.
Lastly, you can start listing and marketing your products on the platform. Make sure you translate the product descriptions and pay close attention to the quality of your listings. European customers will search for items in their native language, which means that English listings will rarely gain high visibility.
Additionally, European marketplaces are flooded with low-quality listings when it comes to descriptions and images, which means that customers are wary and careful in their selection process.
5. Regular filings and VAT duties
Once your Amazon business in Europe is up and running and you make your first profit, it’s time to start fulfilling your regular VAT obligations and file regular returns.
VAT returns are, just like registrations, obligatory in every country you sell your goods to if you are making use of the EU-wide delivery threshold. If you are using the OSS, you will only need to file VAT returns in the country of OSS registration.
If you have a VAT number in Spain, France, Netherlands because you store in several European countries, you might also have to file several VAT returns.
Products that are sold from a warehouse in a country to customers in the same country, which is the goal when using FBA-programs like PAN-EU, make you subject to VAT in that country. The sales, therefore, need to be declared in a VAT return there.
Sales from other warehouses to customers there can still be declared in your combined VAT return for OSS.
Confused? Most VAT service providers not only take care of your registration but also of all subsequent VAT filings. This is especially useful for sellers who are active in several countries, as with the VAT returns, several other documents need to be filed on a regular basis.
The commissioning of a specialized provider will then not only save you time, but also money as the fees for late, incomplete, or incorrect filings tend to run high.
Building a successful Amazon business in the EU is easier than ever. Amazon’s continued investment in the continent and its fulfillment network enable sellers from across the world to service millions of customers.
Since countries and their customers differ greatly but are in close proximity to each other and the E-Commerce industry in Europe is still growing, there is no better time to start selling or to expand to Europe and fill an existing market gap.
While the taxation regulations pose an obstacle to many foreign sellers, the European government has been taking steps to ease the bureaucratic burden for small to medium size businesses in the EU. If you still need help, consider commissioning an experienced VAT service provider that specializes in Amazon FBA, like hellotax. They can help you not only with all VAT but also with all Amazon EU-related issues.