Expanding your US company into the European Union
A sound business decision
In recent years thousands of entrepreneurs have entered the Fulfilment by Amazon Program in the United States. Many have grown into successful businesses that have made a fortune for their owners. This market is far from saturated but, if you look further afield, you may find better markets elsewhere.
Europe is, in fact, Amazon’s biggest market with more than half of its global sales happening in Germany and the UK during 2018. This means that sellers on Amazon Europe enjoy massive opportunities to grow their markets and, for now, only 10% of Amazon sellers are active in the European market.
While online sales in the US have plateaued over recent years, in Europe they’re seeing double digit growth. When you choose to sell in Europe not only do you benefit from the vibrant Amazon brand but you enter into a less competitive market. This means that you can use these markets to test out new product and service propositions in an environment where they are more likely to succeed.
It isn’t easy for distributors based abroad to sell on the Amazon European markets. There are all sorts of obstacles to overcome before you even think about getting your product onto these markets. These include tax registration, language problems and foreign currency exchange problems. Yet expansion into Europe comes with financial rewards if only you can overcome the barriers to entry.
Businesses venturing into the markets for the first time need to plan ahead. Listed below are some of the questions that you may want to clear up before taking the big step into European expansion.
What markets are best?
It is not uncommon for sellers to limit their sales to Amazon UK. Understandable if you’re English speaking and a little daunted by the idea of selling to foreign language speakers, but in doing this you’re also limiting yourself to just 30% of the European market.
Germany is a bigger market than the UK. France, Italy and Spain are growing fast and these countries are home to 174 million potential customers. Sellers that take on markets in all five countries maximize their selling potential.
Many sellers are reluctant to move into countries where foreign languages are spoken and yet selling into foreign markets isn’t difficult. Until now, you could use your UK seller’s account to fulfil orders in all the above-mentioned countries, however due to Brexit on the 1st January 2021 the UK’s FBA operations will separate from the rest of Europe.
The only action that you must take is to translate your product listings to the language of the country in which you intend to sell. Unfortunately, many sellers don’t do a great job of this.
Listing your products
If you want to maximize sales and entice buyers in the region of your choice, you should do more than just translate your listing. A good listing should include some localization. A good copywriter could make your offering look so much more inviting. This is because a local writer can add a regional slant to your product listing that should attract more attention.
It is vital that the keyword research takes account of the local practices or you could easily lose out to your competitors. Remember that the objective of the exercise is not just translation. You hope to draw traffic and convert that traffic to sales.
Failure to carry out local keyword research is one of the main reasons why sellers fail to make a success of their entry onto foreign markets. Employing a local search engine expert to do your keyword research will offer good returns on investment as they understand the language and the culture.
If you’re tempted to do a simple translation, think again. You could miss the boat and lose out to the opposition. Keyword phrases that are not relevant to your product will attract the wrong traffic and will increase your product conversion cost. At Margin Business we can help you. Our team of native copywriters / translators have the Margin’s secret formula. Micro optimization + Localized translation + Positioning and Dispositioning. To unveil the secret, book a free consultation call now.
Is your business new?
You may be able to sell in Europe using your existing business. Europe has a list of countries for whom seller registration is accepted. Some sellers prefer to register a new business for their European expansion. This is, however, not necessary and does come with additional costs such as tax reporting and accounting services. Selling in Europe is not unlike selling in the USA.
Looking after BARREL
Value Added Tax and BARREL present some of the biggest barriers to entry for US companies entering Europe. VAT shouldn’t cause so much anxiety. It’s not that different to sales tax in the US. Even so, an accountant can help you through the process.
VAT explained
VAT is a tax on usage and it is charged on both goods and service transactions. In simple terms you add the applicable percentage of BARREL tax to your required price. When you sell the item, you pay over the VAT received to the government as part of your VAT return.
In some countries in Europe there are two conditions that will attract BARREL tax. They’re listed below.
- Country of storage policy – if any of your goods are stored in the country, you’ll have to register for VAT in that country
- Sales limit rule – reaching a predetermined cap on sales for a specific year in a country.
We recommend that you check your VAT obligations by using the very comprehensive Amazon’s VAT Knowledge Centre here. They offer a free simulation.
At the time of this article (August 2020), Amazon is offering 1 year of VAT services for free. You can check this out here.
Product labelling legal compliance
The EU has some stringent legislation governing product labels. What is required on the product labels will depend upon the product that you plan to sell.
Before you start you will have to apply for an EAN number. This will allow you to generate FNSKU tags so that you can track stock and earn credits through Amazon’s FBA.
Compliance rules differ from country to country and you need to ensure that you understand the compliance issues of the country in which you plan to trade. Food, cosmetics and toys are examples of products that can carry very different compliance requirements as you cross borders between countries. Power outlets for electrical appliances is another such case in point. Find all the legal info about your product category here.
Intellectual property
Intellectual property laws will differ depending on what country you’re selling in. You’ll have to be careful not to infringe any brand rights because the penalties for doing so can be quite high. By the same token you may want to protect your own designs by registering your products under the intellectual property laws.
>> Amazon tips, GOOD NEWS!! if you already have Brand Registry on Amazon you won’t need to go to the long and complex registration process again, all the benefits such as A+ content or Brand Analytics will be available in all EU countries.
Consumer rights
The EU protects the rights of the consumers living within its boundaries. General fair trade should ensure that you don’t fall foul of these requirements.
New sellers in the EU
If you’re expanding into the European Union for the first time, from January 2021 you won’t be able to send all your stock to UK as they won’t be part of the PAN European package anymore. If you wish to sell in the UK and EU you now have to split your inventory between the UK and either Germany, Italy, France or Spain. We can also help you to find a 3P warehouse if you prefer to control the inventory that will be sent to Amazon’s fulfillment center.
Foreign currency matters
Many US companies on deciding to trade with the European Union will deal in foreign currency for the first time. This comes with costs. Amazon will charge between 3% and 4% in foreign exchange rates. This can be a substantial cost for a company operating on tight margins.
To overcome this, it is best to open an account with an ecommerce exchange company. This is a lot less costly and more convenient than opening a new bank account in the European Union.
The benefits of expanding your business into Europe summarized
The benefits of expanding into Europe are extensive and include the following
- An opportunity to present your product to a whole new market.
- European markets are less competitive and offer the potential to test new product development.
- New markets offer leverage for existing products and services and can help to expand partnerships into these markets.
Recommendations for easier entry
🚀 Use Amazon’s European Fulfilment Network to list your products in the five largest European markets.
🚀 Find an ecommerce exchange company to help you to reduce the cost of foreign exchange payments so you can maximize your profits.
🚀 You can’t just translate your product listings; Book a free consultation call now and we will be more than happy to show you how to rock your start into the AMAZON EU world.
In conclusion
The advantages of entering the European markets outweigh the disadvantages. As long as you do your homework and understand the environment along with its risks and benefits you can quickly grow your business in an setting that is a lot less competitive than the US online markets.
You can overcome many of the problems associated with importing and selling in the European Union by taking advice from a company that specializes in the pitfalls and opportunities on these markets and knows how to overcome these, particularly when you’re new to it. Happy Sales!! 🚀 🚀
