Europe holds enormous potential for eCommerce. With its 342 million inhabitants in six Amazon marketplaces, it’s easily comparable to the US in terms of population and potential sales. Additionally, the European markets are not as competitive as the US market. They consistently have a better ROAS – $5.07 vs $6.69 on average – and a lower CPC.
To shine more light on how brands can successfully expand into the European marketplaces, Tom Baker, the founder of FordeBaker, joined Pacvue for an informative webinar.
Here are the most important highlights.
Why choose Amazon to reach the European markets
While the EU is often viewed as one market, it’s still a fragmented one. Launch of products and services across multiple countries can become costly and complex if you do it by yourself.
With Amazon, on the other hand, you can reach an existing audience and distribute your products without upfront costs. Amazon also makes it easier to migrate existing listings from your US account with their Build International Listings.
How to successfully launch a brand in Europe
The first inclination for many businesses might be that the UK is the best place to start because of the common language and similarities in culture. But that might not always be the best approach.
Here are five aspects to look into before launching in Europe:
- Compliance, regulations, and tax. Determine whether you are allowed to sell your product in the EU. Look at the specific regulations for your type of product at the Amazon level and at the country level.
- Competitor sales performance. Drill down in your competitive category and compare the sales volume in that category across all of the different countries. This will give you a feel for expected sales in each country.
- Competitiveness. Figure out if there is one market leader in your category, or if it’s spread between different brands. It’s useful to look at digital metrics such as CPC and Share of Voice, in addition to traditional market share.
- Search volume. Have a look at the search volume to determine the overall demand in each marketplace. It will tell you what brands are stronger than others, and if you can challenge those market leaders or not.
- Amazon’s fee structure. The FBA fee will be different in different countries, so calculate your margin for each marketplace.
These five factors will drive your entry strategy, i.e. if you will enter all countries or selected ones. Regardless of which countries you pick, localization is vital for business success. This means having your listings, customer service, and even packaging (where local regulations specify) in the local language.
How to handle shipping and fulfillment in Europe
As mentioned, it’s important to comply with the different rules of each country, and it’s especially important for sales tax. In Europe, companies operate with the term Value Added Tax (VAT) instead of sales tax.
Typically, you pay VAT in the country where you hold stock, so the VAT regulation you need to follow will be dictated by the type of fulfillment method you choose.
The Amazon fulfillment options are the same in Europe and North America. There are three ways you can use FBA in Europe:
- European Fulfilment Network (EFN). You hold stock in one country only and Amazon move stock from that country to customers in other countries when the order is placed. You get the Prime benefits but the delivery will be a bit slower. Good for small business and business launching in Europe for the first time.
- Pan European FBA. You import your products to one country, and Amazon will redistribute your stock based on your sales in different countries. This results in quicker delivery, but it’s a bit more expensive. Suited for high demand products
- Multi-Country Inventory (MCI). Very similar to the Pan European method but you choose yourself which countries are going to be stocked with your products. Best for businesses with targeted strategies.
For the fulfillment to run as smoothly as possible, it’s best to start early with getting your inventory in order. If things get too complicated, Amazon has a VAT service for their sellers for each country. Additionally, there are a lot of specialists that can help you with VAT regulations.
To get ahead, the three golden rules of VAT and shipping:
- Secure EORI number and VAT number.
- Don’t list Amazon as the Importer of Record (IOR). It will delay the shipment process and will cost more.
- Pay your duty on the products before they get to Europe to avoid delays.
How will Brexit affect your launch in Europe
The current transition period will last until December 31st, 2020. After the transition period is over, the UK will no longer be a part of any of the 3 cross border FBA programs. If you want to sell in both the EU and the UK, you will need to hold stock in both places. Fulfilment across countries still in the EU (France, Germany, Italy, Spain and The Netherlands) will still work the same.
The Keys to Getting Started
The key to expanding into European markets is good research. Make sure you know the local regulations and take your time to ensure compliance. Additionally, it’s important to think about localization to increase the chances of success. With a well-built strategy and support, you can start capitalizing on this valuable opportunity.
If you’re keen to replicate your successes on Amazon.com in Europe but don’t know where to start or you’ve launched but you’re struggling to make an impact then FordeBaker are offering a free 30 minute consultation for all Pacvue blog readers. Simply book a meeting slot with FordeBaker founder Tom Baker.
