FBA in Europe: Tips for US Sellers
by Carina McLeod, on May 8, 2018
You may be familiar with the term "unified account" on the Amazon marketplace as a North American seller, but this term has a different meaning in Europe. A unified account in the US effectively means you can access all accounts under one roof. It doesn’t mean that you can ship products directly from, for example, the US into Canada. Instead you would need to have FBA inventory in the US to fulfill Amazon.com orders, and FBA inventory in Canada to fulfill Amazon.ca orders.
In Europe, a unified account works differently. A seller can have inventory in, for example, the UK and fulfill orders with this stock on Amazon.de. A seller doesn’t need to hold inventory in every country they sell to. They could sell to the UK, Germany, France, Italy and Spain and fulfill orders from a single pool of inventory in only one country. Alternatively, sellers can sell to all marketplaces and hold inventory in every single one of these countries. To give sellers the choice as to how they would like to manage their inventory, Amazon.com, Inc. ("Amazon") offers EU sellers three different FBA programs. In this post, I'll share more information about each of these options.
European Fulfilment Network (EFN)
The European Fulfilment Network is used when a seller holds inventory in one European marketplace. [Ed note: spelling is "fulfil" and "fulfilment" in UK.] They can list their products on multiple EU marketplaces and fulfill orders from inventory in just one European country. For example, if a seller chooses the UK to hold the inventory, they can then list their items on amazon.de, amazon.fr, amazon.it and amazon.es and fulfill all orders generated from those marketplaces from their inventory in the UK.
This fulfillment method is the popular one for sellers wishing to "dip their toes" in the European market. This program requires the lowest investment. The seller only needs to ship inventory and manage customs for one country. The seller only needs to pay VAT (sales tax) in the country where the inventory is held (unless their sales outside of their home country exceed the threshold). Despite inventory not being held in every country that is selling the item, it is still Prime-eligible. The only downside is that the shipping time is longer; approximately 2-3 days instead of next-day delivery. This can prevent sales from reaching their full potential as the expectation of customers is next-day delivery or same-day for those living in major European cities. Also, the seller has to pay cross-border EFN fees, in addition to the FBA fees and referral fee. Although this option requires less initial investment, the total fees are higher.
Multi-Country Inventory (MCI)
With Multi-Country Inventory, the seller gets to choose the countries they want to hold inventory in. The seller may already have products suitable for the UK and Spanish market and therefore want to focus on and hold inventory in both these countries. Alternatively, some merchants know that the UK and German markets are the largest and want to focus on these first instead. The seller can choose which out of the five EU countries where they want to hold inventory.
By choosing MCI, merchants pay less cross-border EFN fees and product is closer to the customer. Although, if they are only holding inventory in a few countries but still selling to other countries, they will have to pay cross-border EFN fees on those countries where inventory is not held. MCI works well with sellers that have specific countries they want to target.
Pan-European FBA merchants have inventory available in every EU marketplace. The seller sends inventory to a fulfillment center in their home marketplace (the country they opened the account with) and Amazon redistributes the inventory to multiple fulfillment centers across all of Europe. Amazon redistributes the stock based on foreseen demand for the products using intelligent systems that automatically manage this process.
With Pan-European FBA, there are no cross-border EFN fees and inventory is close to all potential customers. This means the seller is maximizing their opportunity for sales in Europe. The downside of this is the obligations a seller has when offering products in multiple EU countries. Amazon has fulfillment centers in countries where Amazon is based as well as Poland and Czech Republic. By storing inventory in up to seven countries in Europe, the seller than becomes liable to pay VAT (sales tax) in all these countries. Similar to the US with states, the seller would need to register to pay VAT in each of these countries and file returns in each country. This can become costly and resource-heavy. However, Amazon is trying to offer incentives to sellers to reduce the VAT registration and filing costs through a series of promotions and discounted rates. Pan-European FBA is often for businesses that want to scale up quickly across all EU marketplaces and have the budget to do this.
Many US sellers take a stepped approach to selling in Europe. They start with EFN to understand the logistics of shipping from the US and to gauge demand and identify key sellers. Then they expand to the country or countries that have a higher demand for their product, taking the MCI route. Once they have pushed sales in the countries with the higher demand, they want to maximize their overall customer reach and work on all other EU countries to boost sales and take the Pan-European approach. Sellers that want to rapidly scale their business across all EU platforms and are not on a budget might go with a Pan-European agreement from day one.
Do you have questions about using these European FBA programs? Comment below!