Updated: Apr 9, 2020
Our Amazon journey has been an exciting one so far. We help sellers with things that we struggled ourselves with. We want to share with you our story. Beginners as well as advanced sellers might find it useful. Any questions? Always ASK.
In the beginning there was MFN
We started as an Amazon seller back in 2014, when we did our first Amazon listings. It was a very different marketplace compared to what it is today. The beginning was very exciting. We sold products that our family business manufactured. Sales grew quickly yet the logistics were becoming quite of an an issue. The model we kicked it off with was MFN - Merchant Fulfilled. What it means is that as an Amazon seller you are responsible for order fulfillment - you pick, pack and ship the order to customer using the carrier of your choice. This became quite a hurdle as cross-border logistics back then was not adhering to the order delivery deadlines. There were too many questions like "Where is my package" or "Why is it taking so long to deliver".
FBA helped us keep the delivery promise and grow the business exponentially
But wait, what is FBA? FBA stands for Fulfilled by Amazon and it came across as an excellent idea. We decided to ship our products from Poland to Amazon warehouses in UK. Amazon stored them there and when orders came they picked, packed and shipped to the end customers. I run the first FBA trials in 2015 while doing my grad school in UK. The results were promising. Order fulfillment was no longer a growth hurdle. I felt that as long as we could keep growing sales and do the marketing well, Amazon would always manage to ship the orders on time. And indeed that turned out to be true. We grew the business in UK and also discovered that the products we sell do have some potential in other European marketplaces. But storing the goods in UK and shipping them to Germany using the FBA cross border became a growth hurdle - products were too expensive for the end customers and margins were too low.
Next step: Go Pan-EU
So to understand what Pan-EU FBA is, it is essential to elaborate a bit more on the idea of Cross-Docking. I worked at the IXD (cross-dock) department at Amazon and I had the pleasure too see how big savings across the entire supply chain cross-docking can generate. What is it about? When sending products to FBA the non-Pan-EU, they stay in the target country and can be shipped internationally but using cross-border freight. On the other hand, if you ship to a cross-dock and go with the Pan-EU flow, then Amazon distributes your goods to other countries based on demand forecasts. This way your products stay close to the customers in all European markets and you save a great deal on FBA fulfillment fees. There is one caveat though. Storing goods triggers nexus of tax. So if you allow Amazon to store goods in Spain, you need to register for VAT in Spain and do the regular filings. It seems a bit tricky but we can help yo go through this. It is not a problem if you store your goods in one country. Anyone can handle VAT compliance in a single market. But if you go Pan-EU, there is no pick and choose. You basically need to register for VAT in all countries that Amazon has warehouses in. Depending on the size of your business, this might be worth doing early or later on. Timing is crucial and we can recommend you the best approach. If your sales aren't big enough to register for VAT in Europe, we have some intermediary solutions that would allow you to start selling without the tax bureaucracy. Get in touch with use -->> Here <-- to find out more.
Europe done. What next?
As our business model in Europe solidified, we stated pondering expansions to USA, Japan and Australia. We followed a trial-and-error approach and one learning is really essential. Doing FBA business in US or Australia and shipping directly to FBA proved to be the way to fail. Why? Why do you need a local warehouse for your FBA business in Europe if you are established outside of Europe? We will dive deep into this in the next next part of the blog. CHECK IT OUT HERE.