October 8, 2020
eCommerce experts share practical guidance on how to prepare your Amazon business for Brexit.
As the UK prepares to crash out of the EU on 1 January 2021, the impact on Amazon Vendors and Sellers is starting to become clear. The bad news: it’s not going to be easy. A customs border is going to spring up between the UK and Europe, which will create more work for those businesses wishing to sell between them, and make goods more expensive. In this webinar, Jérôme de Guigné, Founder and Managing Director of e-Comas, and Andy Hooper, CEO of Global E-commerce Experts, provide practical guidance on how to prepare your Amazon business for Brexit.
The 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.
Hi everyone, welcome to our Pacvue webinar, getting ready for Brexit, a topic that has been around for several years and is now just getting very real down the wire here. Before we get started, a couple of logistics notes, we are recording this webinar, it will be emailed out to everyone who registered later today, and it will also be available on the Pacvue website at Pacvue.com/webinars. We'll have plenty of time for questions at the end today so go ahead and use that question box on the control panel in Zoom, and we’ll get to those at the end. I'm super excited to have a couple of guest speakers with us today, so we have Andy Hooper, CEO of Global e-Commerce Experts and we have Jérôme de Guignéan Founder and Managing Director of e-Comas which is a partner of Pacvue. I’m Adam Hutchinson I’m the Director of Marketing here at Pacvue. We're an enterprise software for brands and agencies to manage their E-commerce advertising. We work across Amazon, Walmart, Instacart and other marketplaces. Based here in the US, but we are international. We work across both Asia and European marketplaces, including the UK, and several European markets. We work with agencies like e-Comas to help accelerate brand advertising and really take a full funnel picture of their Amazon success. Jérôme, over to you.
Jérôme de Guignéan
Thank you very much. So two things on myself, I’m the founder of the agency e-Comas. We're based in Luxemburg and the heart of Europe. We help brands actually accelerate or the gross on Amazon in Europe, but also in North America and in Asia, we are helping brands today which are based in Europe, and also in North America, we do a full service from a strategic consulting into also Account Management advertising and that's where we are working day to day with Pacvue and enjoying a lot, and that's why we're having this discussion because we wanted also to share with other Pacvue users or interested in Pacvue of the potentials or risks around Brexit. And did you wanna say a few things about yourself before we jump in?
Yeah, thank you. Yeah, first all, thank you very much for Pacvue for putting this on... Thank you very much for having us. I've got the sun in my face, this is only to prove that it is sunny in the UK, so anyway, hi, my name is Andy I am the CEO here at global e-commerce experts, and we successfully expand sellers into the EU, so we typically do three sort of areas we do compliance, which is VET, making sure you’re compliant with regulations, do label compliance, making sure you’re complaint with those regulations and those sort of things. And then we do 3PL, go to a warehouse, we install facilities, and then we do some account management stuff as well, but things like translations and loads of other bits, but really our focus, core focus is about successful expanding sellers. We want to do what's right for the seller, we wanna make sure that we don't do... When you're expanding, we know that margins are tight, you don't wanna expand with everything, it's about being strategic, exactly what Jérôme was saying a moment ago about being a strategic partner to make that happen. We went well with Jérôme in the past, and actually you can dovetail those things together to make that work, and I think the really important thing is, is that leading into Bexit is making sure that we're clearly ready and everything set up, so overall, I'm hopefully we can give you some nuggets around, Brexit and make sure that you're ready come the first of January 2021.
And let's dive into it. So that was us, you know already all about us, so to start with, we wanted to give you a flavor about Amazon in Europe, so maybe some of you are... They are familiar about the size of the Amazon in Europe but some may be less… so let’s give you a size of the price, let's say, of Amazon in Europe, so the first information on the left is you can see that for Amazon specifically, the size of the US is very big, so probably around 65 to 70%, and then the second market after that is Germany, and then the third one is UK. And then after that, you will have the other countries which are France, Italy and Spain, and now two newcomers have arrived is Holland, Netherlands and Sweden, so you can see that the expansion of Amazon will be a big part in our not only... But Europe is a big one, and specifically Germany and the UK, which is important to bear in mind if you're looking at expanding into other countries, the second one which you would want to go into is Germany, and then the third one is the UK, which is similar in size with Japan, but a bit easier in terms of languages, when you're coming from the states, on the right side, you will see one thing which is interesting is a comparison of the the cost of a prime membership all over the world.
So you can see in the states it is $119, whereas in France, for example, it is 55. Why is that? It's because in France, Amazon is struggling a bit to have a leadership position as they've positioned their price much lower, and you can see also the UK is more as like the states at 100, but then in Spain, it would be even lower at 40. So they are aligning to the market basically, and it gives you an idea of the size of Amazon, but also maybe the purchasing power of the people from the given country.
Now, one picture I really like on the left is if you were to put the US, all the states of the United States into Europe, to give you an idea, you can see that actually all of the states don't cover the whole of Europe specifically. If you start to add Sweden also the market size, geographically but also in terms of number of people, it's quite significantly bigger in the Europe and in the States, it's a bit more complicated because you've got different languages and sometimes different currencies, but the size of the market overall is bigger in Europe, so it's an enormous potential for people in the US, for example, to expand into Europe, and that's what Andy and myself are helping a lot of brands do very successfully because that's an enormous potential.
On the right side, you can see that the UK is a big part of Europe but it's a reasonable market, if you compare to the rest of Europe, which is a massive number of countries, and you have to understand that a lot of countries... So Amazon is only today is only in the UK, in Germany, in France, in the middle here in Spain, in Italy. And it's going into Sweden in the coming weeks, and it's in the Netherlands, but you have to understand that all the eastern countries, they buy mostly from Amazon, Germany. It's one of the reasons why Amazon, Germany is so big. So once you're on Amazon, actually in Europe, you're touching an enormous number of customers throughout the rest of Europe. Austria, Switzerland, they would buy from Germany, for example, Belgium would buy either from France or Germany, maybe, but that means the potential of the market is quite enormous and was the situation until or what will be the situation on the 31st of December is that this market was seen as one market and you can access it through what we call the European fulfillment. Let's talk about fulfillment. You've got three options in Europe. Either you ship, you put your stock, or I'm told for sellers in FDA, you would put your stock into one country, they say for the UK, and then you would be shipping throughout everywhere.
The second option is you ship to every country individually, or the third option was one which was the best option up to now, and it still is, is a pan-EU option, which would make Amazon move your stock around by themselves to make it as close as possible to customers, to put it shortly, what are the benefits and drawbacks of each solution, the first one is that if you're using what they call EFN - European Fulfillment Network, and then it's very simple, you don't need to have a lot of VAT numbers, you need only a VAT number in the UK, it's quite easy, you've got a threshold thing where If you're not doing too much business, it's okay, if you will do a lot of business, you will need to have multiple VAT numbers, but at the beginning, it's a very simple one. The only drawback is the cost, basically, if your products are less than 25 euros retail price probably the cost will be too high for you, the logistics will kill your profits. That's the first option. The second option is what we call MCI, multi-country inventories this is where you ship to every country, every Amazon country, individually.
The benefit is you've got less fees because logistics is local, so Amazon will charge you less fees, it's great if your catalog is not exactly the same per country, 'cause you can tailor it. The drawback is that it's complex because you have multiple warehouses or multiple stocks in multiple countries, and you can't move them so easily from one country to another, the other complexity is that each time you warehouse a product in a country, you will need to have a VAT number in that country, the value-added tax will have to be paid in the country where you are warehousing your product.
The last option is a pan-EU option, where you put your products in one country, say in UK, and then Amazon will send it over to many different countries, and you can see that on the map, on the map on the right, you've got two other countries which are in color are Poland and the Czech Republic, because Amazon has also got warehouses in Poland and the Czech Republic, which are cheaper than in Germany, but therefore... Because you have... Amazon will put your products in those countries, that means you will have to have VAT numbers in those countries, so the major impact for you is that it's very simple, it's also the best customer experience for customers in the sense that they will get the products within one day everywhere in Europe, so that's the best for sales.
The drawback is that you will need the same products everywhere, 'cause Amazon cannot manage exceptions and you will need VAT numbers in every country that's in seven countries, and this will increase now with Holland and probably Sweden in next step, and you can have some fees which are still quite expensive because they're moving things around, so today, or let's say until last year, until Brexit started, we would have said, Okay, pan-EU is, the best option, 'cause if you want to grow your sales its the best way to let Amazon, handle logistics 'cause that's really the strong point, and you have Pan-EU, you put it in the UK, it will go throughout the Europe, or you put in German, we'll put... We'll go throughout Europe, that will stop on the 31st of December 2020, first of January 2021. And we will tell you what's going to happen...
Thanks, Jérôme are you leaving me in to say, Andy will tell you what happens, it's gonna be amazing or it's gonna be ahh... I'm not sure where you were leading into with that, I did.
I think that’s some hugely useful information, I think that the key thing is once we get to Brexit, if we take a look at those maps, again, Jérôme , If we could go back one slide. If that's alright, just to have a look at those once the UK leaves the Europe, no longer will the UK be in part of the European Fulfillment Network or the pan-European network. Because it's no longer part of Europe, so the UK will not be part of the European fulfillment options that are available, whichever one you use, so you will end up with a Multi-Country Inventory, slash a Pan-EU slash a UK option, essentially. And I think that anyone is gonna want to expand, is gonna need to get their head around what that looks like, thanks Jérôme .
So I think Brexit, you know, there's a whole load of different things to think about with Brexit, and I think that everyone, regardless of the opinions around it, the key things to know is that come the first of January, we are leaving the EU, the UK will no longer be part of the European countries, whatever you wanna call it, and all the privileges therefore that come with that.
So for example, the Europe fulfillment networks. Today, Someone buys this product in Germany, I can ship that to them from the UK, and there's no additional customs duties or anything else to pay come the first of January as stands today, what's gonna happen is if you fulfill that to Germany, not only will you have to pay the customs and duty coming into the UK when you originally ship it, there's a likelihood you're gonna have to pay customs and duty as it goes to the buyer in Germany as well, or other parts of Europe. So I think it's really important to understand that come the first of January, there is a very real issue that you don't want to have those additional costs that are gonna make... That are gonna make it infeasible for you to do, and you need to be prepared for that now, not on the first of January, because everything to do with VAT, getting registered for VAT, everything takes time, and it's really, really important that you make sure you're prepared before the date. So that's really the difference, and it's gonna depend on where you're based, so if you're based inside the EU or you're based outside the EU, there's probably gonna be some differences to consider, given that with probably, I think most of this audiences based outside the EU, I think I'm gonna focus most of my information on that, if you've got specific questions, then we can take those at the end for specific instances inside the EU, if everyone is okay with that.
So with being outside the EU, while you're going to consider is where you need to ship your products to, so do you ship your products to Europe or you're gonna ship products to the UK or you're gonna ship them to both, and so on. So let's move on to the next slide. Jérôme, if that's okay. So fulfillment, okay, so let's just touch on some of the real simple basics, you need to pay VAT or you need to be VAT registered, where you fulfill the goods from first and foremost, or where you meet a distance selling threshold, so like in the States, you have Nexus, there's cross-border threshold, you get to. In Europe is exactly the same. I can ship from the UK currently into Germany, and I can sell 100000 euros worth of goods before I have to be registered there now, obviously come Brexit, you're gonna have to be registered in the UK, and you're gonna need to be registered somewhere in Europe, the customs piece, we've all talked about, you know, you get a need to think about that customs border issue. And I would suggest that you do not have to deal with that by being registered in both, and that's really where we come into, you need goods, both in the UK and in Europe, sending goods from the UK to Europe...
Or Europe to the UK is just gonna be too costly to do, it would just wipe out the whole of your profit and will almost make it unviable if you're not careful unless you've got a large profit margin, which is absolutely fine. So the key thing to think about is where are you gonna put those products, which countries are gonna be the best options for you? And what does that look like? So I think we've got some suggestions, we’re gonna come on to... And I'm gonna skip straight past Amazon FBA, 'cause we've already discussed that, you’ve got Pan-EU, but you need to make sure that... It's not gonna be in the UK, 'cause UK is not gonna be part of European network.
Okay, onto the next one. So what would I do in your position? And I think that depends on two things... Well, one thing, really, it depends on the size of seller that you are, if you do 10000 euros, 10000 pounds in Europe, then I'm gonna suggest one thing, if you do over 100000, I'm probably gonna suggest something slightly different. Because that's gonna be relevant to you and what you're doing.
So the first thing to say is You need to be registered for VAT in two countries, those two countries I would recommend would be the UK, because you don't have any other options to return that UK part and Germany. Now, the reason I say the UK, Germany is because the UK, Germany overall as a whole market probably accounts for two-thirds of all sales on Amazon, in Europe, therefor by being registered in two countries, you've got 66% of the market share. Now, appreciate, I've just said that the UK is part of Europe still there, and that's obviously a fraudulent snip 'cause I'm not quite ready for it, but you see where I'm coming from, so by being registered from the UK and Germany you’ve got the biggest slices of the pie if you like, and I think that's really, really important that you know that you're gonna get that biggest part, the downside to that is that you've gotta have two VAT numbers. The downsides of that is gonna cost more money... Yes, I totally get that and I totally appreciate that. You won't want to do that unless you genuinely have to... You need to plan for that, and the reason for that is that Germany could take three to six months to get a VAT number.
Now, if you've not already registered for a VAT number in Germany, there's a very high chance that that might not come back in time, and that is a very real, real issue that you now face if you have not done that. Now, we do think we can still get Germany through, but before Brexit, but there is no guarantee of that, here are the options, like Italy. Italy is a much quicker process, we could get that through in 10 days. So what we're actually saying is, is that the first thing says UK and Germany is by far the best way. Go for UK, Germany, get those two sorted and registry notes, if the registration hasn't come by Christmas, let's say, then actually we probably need to think about making sure we've got you. Registered in Italy as well. The other option is just to register in Italy or France... You know, France is a bit difficult as well. Spain is a pain in the back side, do not register there unless you really need to... If you're on the Pan-EU program, you have no, no option, but outside of that, you really don't do that unless you really have to... So Germany first and then go to Italy because it is quicker, you could go...
Well, actually, we'll just wait til Brexit. You wait till the first of January, you can do that, but you're only gonna get prime available to you in Italy. Now, the Italian market is nowhere near the size of the German market, so you're missing a whole... Coming back to the pie, like my pie, you're missing that whole piece of the cake that you're gonna get to, so I think you really need to consider what those options look like. Now, the other option is if you are a larger seller, is that actually you register in the Netherlands as well. Now, the idea of registering in the Netherlands is if you're sending large shipments into the Netherlands, there's a whole VAT deferment process that you can go through. So you don't actually have to pay the import VAT, getting stock into the Netherlands. It's a lot easier than Germany, getting stock into Germany is really difficult. Your EORI number in Germany has to be a German address. You can't just have Germany EORI number if it doesn't go to a German address, and it has to be on what’s called the VIEs checkup? It has to be on there. So there's a whole load of options around there, and I'm pretty sure I'm coming up to my 10 minutes, so I know we're sort of running up to that.Jérôme s laughing because’s hes like oh Andy I know you're gonna go over...I'm dedicated to not going over that 10 minutes.
I had a question. Maybe you can explain a bit about the EORI number, because that's a very important aspect of what you need also to be ready in terms of having one in the UK and one in the rest of Europe, maybe.
Yeah, perfect. Am I allowed 12 minutes now? So an EORI number is a really key thing. Actually, so an EORI number, for those that don't know, is basically a European number that basically allows you to ship your good into Europe, now obviously, we're no longer gonna be in Europe, but we will be keeping hold of the EORI number for now, I'm sure in time it will change. So you have, if you register for an EORI number in the UK, you get a UK EORI number, if you register for an EORI number in Germany, you get a German EORI number. If you’re shipping to Germany, you need a German EORI number and that German EORI number needs an address where basically customs when they type in your number. They'll go, where is that? Ah that's a German address. Great, Let's phone them and they will phone that address, so to mitigate that, we've actually got a German address and a German phone number to basically make sure that we can counter for that, because that's a real issue that sellers face.
So you need to make sure that you've got your EORI number as well as your VAT number. The advantages of a decent agency like ours that do VAT numbers will get an EORI number at the same time that they do your registration. So you need to make sure that if you've already got a German VAT number or you've already got those VAT numbers, you need to make sure that you've also got the EORI. It's a great question,Jérôme Thank you.
And then once you've got the VAT numbers, the next thing is to make sure you've got stock in those countries, now you need to make sure you've got that stock into Germany, if we're talking about Germany or Netherlands or France, or Italy or wherever before the first of January, which likely means you probably need to order more stock in order to make sure you've got stock the Q4 and then leading into Q1, and it's split between those countries, so there is a chance that you might need more stock to make sure you've got that splits up, got split across those countries because you know, we know that come the first of January, you know there's gonna be some people are gonna wanna sell more.
In that period after Christmas, what we're gonna wanna do is make sure that we can push that. But if you haven't got stock in Europe, you're not gonna be present in Europe, you're only gonna be able to push that in the UK.
That’s a great presentation, well done.
Was that 10 minutes or not?
I think it's a great insight. And I think too, as a summary is like it's preparation, and I think that's what we're really trying to highlight is that...you need to move as fast as you can, if you're in Europe and if you want to address those, those markets, because the UK will become a bit like the United States for the rest of Europe is like it's a total different country where you will have duties and things, which was not the case since many, many years, so I think Adam's got some numbers he wanted to share with us, I'll hand over to you.
Thanks, thanks Jérôme , thanks Andy. So just level setting here, providing some context on what to look out for as an advertiser in Europe and what kind of impact we expect as we go into the year... So this first slide that we'll look at here, is just kind of level setting benchmarks between the marketplaces, and so this is an aggregate level... Look, this is first party data from Pacvue, and obviously the point here isn't that this isn’t gonna be true for every business, but a couple of things stand out when we look at this, just our first plans versus the big discrepancy between the United States and Europe as a whole...
Not surprising at all. But Europe there's so much opportunity here. And so if you combine the fact of what Jérôme said on the actual population size of people shopping or could be shopping on Amazon in Europe is actually larger than the United States, and it's actually cheaper right now to do advertising in Europe, there's a huge, huge open opportunity for brands to take advantage of this, and we look at the discrepancy too amongst market places themselves, the more expensive ones or the tend to be the ones to have around longer, are a little bit more mature in their life cycle, like the UK, for example, this is true in the United States too, as Amazon goes into new categories, as Amazon goes into new regions, we tend to see costs for advertising stay pretty cheap at first, and then over time as a market builds, both as more consumers get into that market as well as more competitors get in there and start advertising into those consumers, we see those costs rise, so point being, first mover advantage now is the time to get in and really take advantage of the open opportunity here. And I think the other thing that I'll mention on this slide is that Europe is not a monolith.
We see these discrepancies because there are differences both in consumer behavior as well as just because your competitors aren’t currently in the European marketplace, and we don't even have another lens on here right now, but that's an entirely new marketplace this year, that's just starting to open a lot of open green pasture there for advertising, and then same for Sweden later this year. So what we advise brand is really take a look down at the category level of where your competitors are and where are they not currently, and use that to your advantage to get in front of consumers and start to win market share early.
The next slide here, this is advertising Trends, month-by-month basis for 2020 so far, and obviously, what we're looking at is the impact of covid 19 pandemic and the shut down. What I think is really interesting here is the main story line that we've seen both in the US and in Europe, is that this is actually... It's a supply chain story, it's an inventory story, advertising was impacted drastically as... brands started going out of stock, so what we saw in the US that this started happening around March and into April, so timeframe slightly delayed in Europe, we started seeing was obviously as ability to ship items into countries got tighter and tighter and just production of items reduced as well we saw these brands pull back drastically on their advertising dollars, but what actually happened was consumers were still shopping online and demand actually increased over this time frame, so you saw the price for these Auction Bids decreased while demand continued to increase and so there was a huge advantage for the advertisers that were continuing to spend on these platforms, again, with the big caveat that if you had the supply and the inventory in order to do that, and so as we look ahead to Brexit...
This is kind of the number one thing that we were talking to people about from an advertising perspective, is there's not gonna be this drastic difference in advertising where you're gonna get hit is... Do you have a stock where your consumers are currently buying, are you gonna be able to keep that inventory up, and more importantly, are your competitors going to be able to keep their inventory as well, or is there open opportunity to go game market share because they're going out of stock on their top tier items, and you can go in to competitive conquesting and take some of their customers, so we back to see some of these trends. Again, as long as consumer demand stays high and stock becomes more restrictive, it's actually an open advertising opportunity for you to go step in. And the next slide here is just the same view of this, just at ROAS. There’s always an immediate kind of pulled back in terms of return on ad spend when there's these big supply and changes, brands who are able to lean into that and find opportunities for a competitive conquesting see huge returns on that because the price for these auctions are so much cheaper, demand is high, and then in both the Europe and the US, we see this drop off in ROAS we go in to Q4, there's a lot of deals are coming online as a people are pricing down their items, and then obviously consumer demand pulls back slightly before we get into the Q4 timeframe, so this will start to rise again in a similar thing as we look forward into Brexit.
We'll have the normal kind of seasonality post Q4 come back on spend, but as well, if theres shipping concerns, if consumers are seeing very long ship times for products that they're used to, that just kills conversion rates, so being aware of, are you in stock in the places that you need to be... Is gonna be your biggest impact on return on Ad spend.
The final slide here is just in general category data at an aggregate level, and really the point that I wanna make is that everything I just said doesn't matter unless you're looking at it at a category level, because there are so many discrepancies between the way consumers shop, the different locations that are stronger in certain categories rather than others, and of course where your competitors are versus where they're not, and so, great to look at the macro economic trends, but really drill down into what's happening specifically with your category, think your top competitors, and look at those by marketplace, you might have a one competitor that's very strong in the UK and will remain strong in the UK, but it's gonna get hurt in the rest of Europe because they haven't figured out the supply chain issues. That’s an opportunity for you to step in.
And so one of the way that we measure this at Pacvue is Digital share of voice, looking at your competitors by product, by keyword and category search terms, are they falling off on page one, are they not showing up as often because they're going out of the stock because they have to pull back on advertising, being able to track that and then being able to respond to that, to jump in and advertise wherever your competitors are falling off is actually where you get those big stepwise gains in your strategy. So that's all we have from the advertising data, obviously, we're happy to answer any other questions as well, but I think we actually have some questions coming in, so why don't we start to take those. And the first one that we have here is one that we hear a lot, which is, What are the pros and cons of being set up as a vendor versus a seller specifically in Europe.
And so I'll take this one Andy, and we’ll fight for the next one. So the difference in Europe compared to the US, in Europe still can get invites for vendor accounts, it's becoming a bit difficult, but it's easier than in the US.
The main benefit is, for me is long story short is having a vendor account is if you don't have any pricing issues, so that's no fight on the buy box, and if your product is a high runner and the vendor account will be the most successful one, and it's also simple in terms of VAT because it's a B2B relationship, so there's no VAT stuff. For any other type of product, so if it's not running very well and the algorithm will not pick it, then Amazon will not start to buy it, and it will not be offered on the vendor side and when the cycle will not work, so on the seller you have the long tail, you have also items which are completely new and you want to test. So the best situation we like to have is a hybrid, in a sense where you test products on the Seller and then when they run well, you put them on the vender side, the only thing you need to note on the vendor side is that you need to be able to ship within five days, so that means if you're based in the US, you need to have a fulfillment center or a warehouse you own in Europe to be able to fulfill orders from the vendor side. If you can't do that, then you have no choice. You have to be a seller.
That was the short version.
So for US, brands that are looking to expand into your Europe, knowing we're so close to January, what do you recommend they do now, or should they... Wait
You mean going to Europe, altogether or specifically linked to Brexit?
A US brand that is looking to expand into Europe for the first time, or wanting to expand their offerings.
There’s no bad or good time, obviously, if you go now, you will probably miss out the hype of Q4 because algorithm will not have time to pick and so on, but it's not worth to go here then rather than in January. Okay, the FDA costs would be a bit higher, things like that, but you could start that the earlier you start to prepare, the better, so start with getting the VAT number EORI number, figuring out what your best solution vendor or seller. Obviously, we're partners and we work a lot with Andy on the VAT side, find people who know about it and to have it chat with us or with other people, and try to get an understanding to start, but get the right kind of information before starting.
I think a there's never a good or bad time just get on with it and make it happen. If you wait, you're just stalling. It's just an excuse. Should we do that? There's never a right time. Get on with it. Make it happen. My suggestion would be Register in both the UK and Germany, and you then got both opportunities and then you've got everything covered, that would be my golden... That's the way to go. Do both. Keep it simple, if you need it a fulfillment house like Jérôme was saying then you've got those options, we've got something, but you know, there's plenty of options out there, but really, you wanna focus on getting a VAT number and just get shipping. There's never a good time. Get on with it.
Another question coming in around advertising, what is going to be the impact of Brexit on advertising on Amazon? So short answer, no, nothing's fundamentally changing on advertising, the bigger impact is obviously on inventory, and then how does the inventory and also the total sales and demand impacting your advertising strategy.Jérôme is there anything else you wanna say on that?
Not genuinely, it's like any... If you run out of stock, you’re throwing money out of the door and actually sponsored products will not run and your sponsored brands advertising will be handed to others which are probably selling. So the idea is really to... On the advertising per se there is nothing... There won't be any specific keywords, I don't believe so, but it's just making sure your fulfillment is running, that's all.
Okay, so a question coming in, If you do not get stock in the EU market before January 1st, what does that process look like to fix that situation, especially if you haven't registered for a VAT.
So I think that if you haven't registered a VAT number, you won't be able to set up the European... If you're based outside, you won't be able to set up a European Amazon account and ship, you'll be able to set up an account but without a VAT number, Amazon won't let you actually sell anything. So what I'm presuming there is that they're selling on dot com, let’s say, and someone from Europe buys the product and then ships it direct to the customer, so you can do that... No problems at all. And you still will be able to do that. And essentially, there'll be no difference because someone will have to pick up the duties and customs when they arrive at the customer's door, so if you ship it to me, I'm gonna go, Oh gosh, I'm gonna have to go and pay the customs and duties when it turns up at my door. Now, most people don't wanna do that. It's just a put off. So you can still do that, there's no drama of that, the other way around that is you can still have a VAT number, in let's say the UK, and what you could do is that you could ship your products from the States directly into Germany, if somebody buys Germany rather than going from the UK, so instead of paying, let's say you've got your products in the UK and you've had to pay import duty and tax coming into the UK, if someone pays it in Germany, instead of having to pay again, what you could do is you could ship it straight from the US, let's say directly to the custom in Germany, you're not paying VAT twice on that product, if that makes sense.
So that's another option. But you've said there that you're not registered for VAT anywhere or you're not successfully registered, that if you need help successfully registering, then give us a shout, but you know, that's what I would recommend. You can still ship from the dot com directly in, you'll just pay the customs or the customer will pay the customs and duty.
But it's not a great way sustainable to grow with the business. Obviously, if you know, if you want to invest long-term, you really need to do it properly, sit down, have a strategy.
So we have another person here who do have their German VAT number, they do not have their EORI number yet for Germany. Wondering pros, cons, the difficulty and expense of getting fiscal location in Germany versus just doing another country in Europe.
Okay, So your EORI number you can get a German EORI number without a German address. That's actually not a problem, but you need to make that actually, when you get the number, it has a German address on that, they don't tell you that, but that's the information you need. Because when someone says, Oh, we can do your German EORI number. Yeah, you can get one. But it has to have that German address on it. Now, there's two options. You could get a Malthouse or buy an address somewhere, that's one thing that you could do, so you could do that and that would give you an address. But what you also need is a phone number of that, because customs will look at the address and phone that number to make sure that that's a German address, so the German number could come directly to you and be reforwarded... I guess that could work. There is no problem without... So that could happen, the easier ways to is to make sure as you could work with us, we could give you a German address, and then that's a lot more affordable, and then if someone phones, you know that someone's gonna pick up the phone in German and answer in German, and make that happen for you.
So that's the other option. I think that really answers that basically, you should need to get a German address on it when you register for the EORI number.
I think is, you need to set up also decide which market you want to go to based on the potential of your brand, usually like 80% of the time, Germany will be the biggest potential in Europe... Because Germany is so big, but some brands could have a special recognition in one specific market, like if you're specifically... Well, known in France, or Spain, you will probably want to base yourself in that country and make it your home country, so our advice is usually to not go from the cost level specifically, but try to find the market which will make most sense. And like Andy said, most of the time it is Germany.
And Andy you did mention the Netherlands are there specific advantages or disadvantages of the Netherlands versus Germany.
Yeah, there are some advances basically with the Netherlands, when you're importing in to there, one, it's easier to get the stock in there, and that's because it just flies through because they're a logistics country. Really, that's what they do. If you think of all the biggest retailers around the world, they ship everything into the Netherlands as the gateway to Europe without any shadow of a doubt, that's what what happens, they're just set up for it. So everything that goes in, I'm not saying Germany can't deal with it, but they are well used to it, they're just dealing with such a bigger volume than what Germany are... And the other thing is, is that while... Does that work well, what actually you can happen is when you're shipping into Europe, you need to pay import VAT, now when you're shipping into the Netherlands, you can defer your import VAT to do that on your VAT return. Now, the advantage from a cash flow point of view is significant if you are a smaller seller, actually the cashflow part of that, whilst it's important, we're not talking tens or hundreds of thousands of dollars, we're actually talking a small amount of money, but if you're a bigger seller actually, your import VAT could be a large sum of cash, you just put a container, you pull a container into a Rotterdam or in Amsterdam, you pull that in, you spend tens, if not hundreds of thousands on stock, then bear in mind, you've not sold any of that yet, you think got to pay your input VAT. if you've got three months before you do your VAT return...
Yeah, then all of a sudden you've got three months grace to start selling that before you give the government any money, so it really, really helps with cash flow, the downside is you've got to be VAT registered somewhere else, and there's an additional cost for that, but that's why it works once you to start scaling because it's much more effective and there's a whole load of other benefits as well, but that really is the key thing that most sellers... It's like, I can defer that. That's like a game changer for some.
So we've talked a lot about... Obviously, making sure you're still in Europe. What about vice versa we got person here who is a large European seller, they wanna make sure they can continue growing in the UK. What are the next steps for that? And does Amazon have any kind of offerings to help with that process?
So if they're already in the UK and selling in the UK, like the UK, inside UK, business will not be affected. If the initial stock is in the UK, that's not a problem, what would be affected is the rest of Europe, if they were fulfilling the orders from the rest of Europe from the UK, that will change because either they were shipping it to Amazon or shipping it directly to customers from the UK. Before there was no import taxes, there's no duties. From the first of January, there will be duties and that will create delays as the idea is that before you could send it through now, probably customs will check, we'll have to... You will have a lot of paperwork to do. That's the main impact, and what we're saying is put your stock in advance in Germany or wherever to test it first and to make sure it's already flowing, because probably a lot of people will react after first of January and there will be a lot of backlog of asking for VAT of this and that. The earlier you get started, the better you would be organized, but for sure, it's like inside UK is okay, it's outside of the UK or outside of Europe into UK that’s the cross-border thing which is an issue.
I think if you're based in Europe and you wanna carry on selling in the UK... I think there are some things to consider. If you want to carry on selling in the UK, first of all, you need to make sure you got a VAT number. That's the first thing. So that you need a EORI number for the UK. That's the second thing, I think next thing is you need to consider what the logistics around that look like, how are you going at you... 'cause in the moment, if you're on Pan-EU, you're just gonna dump your products into one country, and I mean dump and Yeah, I'm sure you do a little more effectively than that, but really what you're looking into this is for Amazon to distribute that for you. Well, post Brexit, Amazon's not gonna ship that to the UK for you, that is not gonna happen, so you are gonna have to ship your products one to the UK and secondly to Europe, so you're gonna have that split, ideally, you're gonna wanna do that from a point of view from where your manufacturers sending those products directly into those two countries. now depending on how large you are is going to depend on whether you can send a container to each...
There are options coming up around something called Free ports, which will discuss at a later time, I'm sure, but really, you're gonna send two shipments once you're at one to the UK, key thing, VAT number. EORI number, you need to consider the logistics, make sure you've got 3PL that can do that for you, and so on.
So I know we’re running pretty low on time.Jérôme , Andy, do you have any kind of final thoughts for our audience?
Thank you. So we can't stress enough. The fact of being ready, it's like either you want to move fast and you need to do it now, otherwise you'd probably have to wait for Q2. 'cause my expectations, and I think Andy will agree on that, is that Q1 will be a mess because customs will have to re-start working, and they don't know, and a lot of flows and even Amazon doesn't really know for sure, so they will probably be cutting a lot of things. That's what we're saying. Okay, before that mess, plan things out, so you need to take a decision if you're unsure about Europe and maybe give it... Give it another six months and don't rush.If you're sure, it has a big potential because most of the time it has then move as fast as you can.
Yeah, and I think just leaving you from that I think the first thing is, it's gonna be a bum fight, there is no... This is completely unknown to all governments, and whilst everyone puts the best possible strategies in place, we all know that the tactics of battle do not always lay best when the plans put in place, so we can put the best plans in the world. But the reality is, governments don't have a huge track record of doing things that great when it comes to these sort of projects, and you need to make sure that whatever happens, you're making... You're mitigating the risk for your business in the best possible way, in mitigating that risk from my side, looking for the sellers that we work with is you need to be VAT registered in UK and Europe, you need to have an EORI number in both, you need to have a logistics provider in both, and you need to make sure that you've got stock in both, and whatever happens from there, you need to make sure that by doing those things, you're okay.
Outside of that, what happens with the customs... Exactly asJérôme said its gonna be a nightmare. It's gonna take longer. It's just gonna take longer. There's no doubt about that. I went to, I go to the Netherlands, we’ve got a warehouse in the Netherlands. I go, I'm going tomorrow. I went by ferry the other week, and it was taking a lot longer to go via ferry than it would do normally, bear in mind that the ferry can take a thousand passengers or 1000 cars, I don't know which... I can't remember which, and there was 58, 58 passengers on board this ferry, because obviously no ones traveling, and it took longer to get on the boat than it normally does, and then you had 58 people, 58 cars, either way, you know, they were checking every car... I was that why we're checking so much... You feel free to check. And well because of Brexit, we're learning how to do it. Well great, but it was just a nightmare basically, so hopefully for my side, for my advice to you is get a VAT number in UK, Europe. Get an EORI number, get your logistics, make sure you’re stocks there, and overall, you're mitigating that risk as best you possibly can, and just seek out the best of advice, whether that’s Jérôme, Adam, me, whoever that is, make sure you're seeking that advice to make sure you're doing the right thing to mitigate the risk on your brand and to make sure it's a success.
If there are any other questions, obviously feel free to reach out to any one of us to here , and obviously, you can always reach out to Pacvue, if you're a current Pacvue client, we can certainly connect you with Jérôme with Andy with whatever you need to help you through this process. This webinar will be available online, we'll email it out, you can go to Pacvue.com/webinars, you can also see all of our previous ones, and our next CPC report, quarterly CPC report is coming out in a couple weeks here, we have a webinar on the 22nd for this. Make sure to sign up to get all of that great data. Otherwise, thank you all so much for joining us. I hope to see you again soon. Thanks Jérôme, thanks Andy.