Going global is an intimidating concept, especially if you’re a smaller seller. Usually, international selling conjures up images of absurd shipping costs, confusing foreign taxes, credit card fraud… However, there are a number of benefits to expanding your business overseas, and the magic of Amazon means that the most headache-inducing steps are already taken care of for you.
To be fair, there are still challenges that come with overseas expansion: Amazon takes away some, but not all, of the extra considerations. Ultimately, it’s up to you to determine if your business can handle the extra responsibilities, and weight the potential gains against those responsibilities. Let’s go over some of the major benefits, as well as some of the challenges/considerations, of selling internationally.
Shipping is Easy With FBA
Selling internationally, especially in Europe, is made significantly easier with Fulfillment by Amazon (FBA). Specifically, the European Fulfillment Network (EFN) means that you only have to ship your goods to one warehouse, usually in the UK. After that, you can list your products in other countries in the EFN, and all orders will ship from that centralized warehouse.
There’s also Pan-European FBA, where Amazon will ship your products across Europe to different distribution centers in many different countries for reduced fees, but we strongly caution against using it. Yes, your fees get reduced, but this comes at the cost of a massive tax trap — you are obligated to register for VAT in every country where your inventory is stored, which can be up to seven different countries (the five EU marketplaces, plus Poland and the Czech Republic). Click here to read more about the dangers of Pan-European FBA.
Smaller, Rapidly Growing Markets
Amazon.com is the biggest Amazon marketplace by far, and its enormous size comes with both benefits and drawbacks. The benefit, obviously, is that there are more customers looking to buy your products. The downside, naturally, is that there are also many more sellers. The competition is more cutthroat, the niches are harder to delve into, and it can be very difficult to rise to the top when there are already dozens of competent sellers vying for that spot.
Overseas markets, in comparison, are smaller than the U.S. market, but they’re growing rapidly. Amazon India doubled its marketplace seller base in the past year, and European markets have been growing at a steady clip for years.
Plus, smaller markets means less existing competition. In Europe, you’ll have an easier time exploring new or existing niches, and with a bit of elbow grease, find it much easier to rise to the top. Cementing yourself in these marketplaces early, as they grow, is also to your advantage. As more customers come to these markets, you’ll find yourself comfortably at the top and gaining more and more sales, while the latecomers struggle at the bottom.
Of course, it’s not as simple as picking a category and instantly rising to the top. One of the first things you should do if you’re considering expanding globally is research the markets that you’re targeting. Does your product line fill a particular niche? Are your would-be competitors dominating the space, or can you differentiate yourself and rise to the top?
Finally, a lot of the selling technologies/tools that are ubiquitous in America don’t exist in Europe. On the one hand, this means that it might not be as easy to optimize your selling in these new overseas markets; on the other hand, this presents a much greater opportunity to differentiate yourself from the competition, if you’re willing to take matters into your own hands.
Reviews Don’t Carry Over
Since you must create a new listing for every product that you’re selling internationally (assuming that you’re selling private label), all your hard-earned reviews will not carry over globally. This also applies to each European marketplace, even though they’re all on the same fulfillment network: the reviews you get in amazon.co.uk will not carry over to amazon.de, and so on.
This used to be less of a problem when we had incentivized reviews, but now you’ll mostly have to rely on Sponsored Products and follow-up emails to generate reviews. For some tips on how to get over the hump of starting with no reviews, click here and read our post on addressing the Cold-Start Problem. Building a brand, the first tip in the above article, is especially helpful when selling internationally — it shows sellers that you’re an established company that they can trust, and allows you to provide them additional value that they wouldn’t otherwise get. If you can translate some of your pages into the primary languages of the marketplaces you’re selling to, you’ll be at an even greater advantage.
Most American sellers know exactly how complicated sales tax can get, but it’s at least familiar to us, because we have to deal with it day in, day out. Value-Added Tax, or VAT, is Europe’s version of sales tax, and it’s an extra, unfamiliar paperwork nightmare for sellers thinking of expanding internationally.
Click on the image below to read our post on how VAT works to get a better idea of the basics of VAT and how it will affect you as an Amazon seller.
Here are the basics: VAT is collected on a country-by-country basis. In the UK, the place you’re most likely to be paying VAT to, it’s a flat 20% rate for most consumer goods. You are required to pay VAT to any country in which a) your inventory is stored, or b) you sell to AND have exceeded a certain “distance selling threshold” in euros.
Thankfully, with EFN, you only have to pay VAT in the country where your goods are stored (usually the UK) — you can ship to other countries simply by listing them in the corresponding marketplaces, but you’ll only have to collect UK VAT on those sales until you cross certain sales thresholds.
Again, consult our article, linked above, for the full details on how to be VAT-compliant when selling overseas to Europe — it’s a complicated process that’s easy to get wrong, and if you do, the tax authorities will come down hard. VAT evasion is a big issue for online marketplaces in Europe, and revenue agencies are getting stricter and more active with each passing year.
Language and Culture Differences
Language difference is one of the first problems you’ll run into when trying to expand overseas. Yes, English is considered by some to be the worldwide lingua franca, but at the end of the day, you’re still marketing yourself to customers. Speaking to buyers in their own native language should be a priority.
When you’re just starting out, you may want to limit yourself to English-speaking countries like the UK and Canada so that you don’t have to translate any of your copy. English also can work in Germany, but we would caution against this — although many Germans can speak English, it’s always more comforting to read a listing in your own native language. By keeping your amazon.de listings in English, you’d be at a pretty significant competitive disadvantage.
However, if your preliminary international sales are doing well, or if you spot a gap in the market that you want to take advantage of, you will likely want to expand into non-anglophone countries at some point. There are myriad translation services available, and if you happen to be so lucky as to have a multilingual employee, that can fix the language problem.
Even if you’ve translated your copy, though, you may still run into other cultural differences that are important to take into account. For example, preferred payment methods differ across the EU: Germans prefer wire transfers, whereas Brits are partial to using Paypal.
Ultimately, language is yet another reason why the decision to go global should not be taken lightly — you should only commit once you’ve done enough research to familiarize yourself with the market, in terms of competition as well as culture.
Taking your sales overseas is a big leap. Even in an increasingly connected world, even when Amazon will handle shipping and distribution, even with all of our modern advantages, selling internationally is no easy feat. As we’ve repeatedly stressed, it’s a decision you should make after lots of careful thought. Can you handle the extra costs? Should you adjust your margin to account for VAT while still pricing competitively? Should you translate your content to target non-anglophone countries? You’ll need to answer all of these questions, and more, before you make the leap overseas.
If you do decide to go overseas, however, you’ll find that it can be a very rewarding experience. If your growth was stagnating a bit in America, you might find yourself shooting up the rankings in Europe and beyond, increasing profits to boot. Getting a foothold on the international market will increase sales, solidify your brand’s standing, and continuously present new opportunities for expansion. If you can manage it, you should try it.