BREXIT NEWS: MASSIVE Change to Amazon FBA PAN-EU Program!

Welcome back!

I hope that everyone is enjoying the summer and the nice weather outside! I wanted to take July off the blog to relax a bit before the “new season” starts in August, BUT the announcement Amazon made on the 14th of July is too important for me to ignore and not share with my followers. Well, at least I got two weeks off! 🙂

Due to the Covid-19 pandemic, everyone seems to have forgotten about the whole Brexit saga, but let’s be real, it is happening—and it’s happening soon!

The UK officially left the EU on January 31st, 2020, and even though we don’t know whether a deal will be made or not, starting from next year (January 1st, 2021), the UK will leave the EU’s single market and customs union.

I’m still maintaining my optimism and hope that there will be a deal and some kind of trade agreement by then, but Amazon can’t wait around and hope for that to happen.

They have to plan these things ahead, change their systems, build new infrastructure/software, etc. So, it’s no surprise that they have taken the worst scenario as the DEFAULT scenario and have been working from the assumption that there will be a hard customs border between the UK and the EU starting from next year.

If you’re selling only on Amazon UK, there’s nothing to worry about. Nothing really changes for you. But for those of you who are enrolled in the EFN or the Pan-EU program (like me), a big change is coming in terms of how your goods will be distributed.

Here’s the official announcement made by Amazon about how things will change from January 1st, 2021:

• FBA offers using EFN will not be fulfilled across the UK-EU border.

• Pan-European FBA inventory transfers will stop between the UK and EU (however, the Pan-European FBA program will continue to transfer inventory within the EU region, supporting your sales on the platform’s German, French, Italian and Spanish sites).

Let’s take a closer look at how these changes will affect your Amazon FBA business, and most importantly, what you need to do NOW to prepare for this change.

How to Sell on Amazon’s EU Marketplaces
in a Post-BREXIT Era!

Ok, let’s start with the first announcement: FBA offers using EFN will not be fulfilled across the UK-EU border.

This basically means the END of the EFN (European Fulfilment Network) program. For those of you who don’t know what the EFN program is, it basically allows UK sellers to create listings on Amazon’s EU marketplaces but fulfil those orders using UK stock:

Even though the fees for this program were pretty high, it was a quick and easy way to start selling on other EU marketplaces WITHOUT registering for VAT numbers in other countries.

Now, when a customs procedure is in place for goods moving between the UK and EU, Amazon will obviously no longer be able to provide this service UNTIL there’s some sort of solution put in place. We’ll have to wait and see whether an agreement with the EU will be made or not. And if an agreement is made, what the trade agreement rules are, etc.

Maybe there will be a simplified customs procedure and Amazon will integrate it into their infrastructure. Maybe the free movement of goods will stay in place. We simply don’t know any of that yet. So, we have to prepare for the worst, and that why this program has been dismantled.

What does it mean for people who are currently using the EFN program?

It means that you have six months left to join the Pan-EU program, register for VAT numbers in each EU country you sell in, and simply take your business to the next level.

Or, if you get very few sales from the EFN program and simply don’t want to bother with the Pan-EU program, you can choose to lose those EU sales and be left with the UK marketplace alone.

If you need help with your VAT registrations in the EU, I can recommend the company I personally used for mine and still use for my monthly VAT returns: VAT Global. You can contact them to get a quote, including an exclusive DISCOUNT if you use this code: ANDYVAT2020

Then there’s the Multi-Country Inventory (MCI) program. The way this program works is that you choose specific countries you want to send stock to and you can then fulfil orders from other countries/marketplaces using stock stored in those specified countries.

Amazon hasn’t said anything about the Multi-Country Inventory program and how Brexit will affect it, but my guess is that this program will stay in place.

The only difference is likely to be that you won’t be able to fulfil EU orders from the UK stock and vice versa. This is because there will be a customs procedure in place between the UK and the EU.

Even though most people decide to go with the Pan-EU program, the MCI program can actually be a good option for many sellers. The thing is, in the EU, the two largest Amazon marketplaces are Germany and France. Italy and Spain are much smaller, and the Netherlands is an even tinier market with not a lot of traction.

Now, if you sell a niche product that doesn’t generate massive sales on a daily basis, joining the Pan-EU program may not be the best option for you. This is because you will still have to pay for VAT returns services in Italy and Spain—countries where you may not sell a lot of items.

In most cases, France and Germany are where the money is. With the MCI program, you can start selling in these two countries (or just one of them) and minimise the cost of VAT registrations and monthly returns.

Yes, after January 1st, 2021, you will have to organise all stock movement on your own, which means that you will have to “export” goods from the UK to the specific country you want to sell in. This will create extra costs for you—there’s no doubt about that. However, you can usually charge a slightly higher price in EU marketplaces than you can in the UK (simply because there’s not that much competition).

The item’s size and weight, as well as the quantities, will be the determining factors here. Personally, for me, this wouldn’t be a huge problem as I sell small items and send them on pallets to Amazon. This means I can send 2000 items with a resale value of £20,000 to ANY EU country for £200 to £300. That’s a very low extra shipping cost per unit, even when you add on customs processing fees.

If you have small quantities of products, or products that are quite bulky or heavy, your shipping costs will likely be too expensive to send by a courier service. The only viable way to continue selling these types of products in the EU marketplaces would be to send the goods on pallets. To keep your costs low, only send small, lightweight items by courier.

Ok, that’s the EFN and MCI programs covered. If you have any further questions, please leave your comments below the post.

But what’s happening with the flagship Pan-EU program? Let’s find out!

The BROKEN Pan-European
Amazon FBA Program!

From the official Amazon announcement: Pan-European FBA inventory transfers will stop between the UK and EU.

This is expected. With a customs procedure in place at the border, Amazon won’t be able to freely move goods in and out of the UK.

This means that the Pan-EU program, as we know it, will end on January 1st, 2021.

Again, it is my hope that Amazon will be able to streamline the whole process and re-introduce the program in the future, but for now, we have to deal with the new reality that Pan-EU program will only partially continue to work across the EU marketplaces and countries.

What does this mean for UK sellers currently using the Pan-EU program or sellers who are planning to sign up for it?

We’ll have to get our items across the border on our own and basically monitor two inventory pools: the UK side and the EU side.

Currently, when you go to the Manage Inventory page in your Amazon account, you see the TOTAL stock/units across all countries:

Right now, you don’t really have to worry about how they’re distributed across the countries because Amazon does for you—automatically and for free.

Starting from next year, there will be UK stock and EU stock. I’m sure that Amazon will implement this on their dashboard to show these inventory levels separately, but even now, you can get these numbers by going to Reports > Fulfilment Reports and choosing the Multi-Country Inventory option from the menu on the left:

This report will clearly show how many units you have in each country for each SKU.

Why is this important? And why did I want to share this news with you ASAP?

Because it’s already the middle of the July!

We’re fast approaching Q4, when massive delays are to be expected at fulfilment houses. You don’t want to leave this to the last minute as you will then risk running out of stock in the EU marketplaces after the 1st of January, 2021.

Even now, with the Covid-19 pandemic, I see massive delays in processing times at warehouses. It took more than a month to get a scheduled delivery slot for my last two pallets, and I do believe that this is only the beginning. In October, November and December, things will get really messy. It could even continue into the early part of the next year, too, when the customs delays come into effect.

So, knowing all this, I am personally stocking up BOTH sides of the inventory pool in August and September, as well as October at the latest.

Yes, this means investing more money into the stock that I want. And yes, this means paying extra in Amazon storage fees. But at least I can be sure that I will not run out of stock in Q1 and possibly Q2 of 2021. Meanwhile, everyone else will be running around, stressed out about low inventory—just like they were when the coronavirus hit earlier this year.

I recommend you do the same. Carefully analyse your past sales, build projections for the remaining months of this year and the early part of next year, and build up that inventory at Amazon so you’re ready for the big change.

I know that this will be particularly difficult for new sellers who don’t have the same level of historical sales data as more established sellers. They may also be short on cash—I get all that. Just do your best and really invest in inventory as much as you can.

If this is your first Q4, chances are that you will run out of stock before Christmas comes. This year, I expect a MASSIVE increase in sales during Q4 because more and more people are shopping online now! Plus, we don’t even know how the coronavirus will play out this winter. Maybe it comes back at double strength and we’ll be facing another lockdown scenario. Who knows? But the data is clear: online sales are skyrocketing, and I personally don’t think it will slow down any time soon.

Another important thing to consider is that right now, you can send stock to Amazon WITHOUT dealing with any customs procedures. We don’t know exactly what it will look like when it’s brought in, but there’s no question about the fact that it will come with an extra cost.

Another unknown factor right now is HOW Amazon will distribute the stock we send in this year. We can’t really control the process, and all I can see from my inventory reports is that they have allocated units based on their historical sales in that country. So, I hope that Amazon will do a good job on this and will have distributed stock levels across all countries come the 1st of January next year.

Maybe they will even offer sellers a way to move FBA stock between countries before the end of this year? Or perhaps they will fix the levels at some time well before the new year kicks in? Who knows—we simply have to wait and see!

Conclusion

The change is coming, and it’s coming soon. We, as Amazon sellers, can’t afford to waste July and August doing nothing and expect to fix all these issues at the last minute, in Q4. Get ahead of your competition and plan your stock levels, stock allocations and sales projections right now. Put it all in a spreadsheet and calculate the orders you need to place with your suppliers, etc.

Going back to the actual movement/shipping of goods, in most cases, the most cost-effective way to send goods to Amazon’s EU warehouses is to send them on pallets. A full 2-metre tall pallet will cost you less than £300 to send to France or Germany, which is great value.

Remember, the Pan-EU program will still continue to operate within EU countries, which means that you only have to send your goods to ONE EU country and Amazon will distribute them to the others for free.

So, when sending goods, just pick the cheapest offer you can find. In my experience, that’s usually France.

Courier delivery can still work if your goods are not very big or heavy. A parcel weighing 30kg will cost anywhere from £15 to £20 to send to France, so if you can pack, say, 100 items in such a box, it’s still good value. If it’s just 10 items, not so much.

But then again, you have to look at the item’s price and margins. If you make a £30 profit on an item, you can afford to pay a lot more in shipping fees than someone who just makes a £3 profit per unit sold.

Whether you’re looking to send pallets or parcels via courier services, it’s always best to shop around for best deals/prices using websites like:

• https://www.sendapallet.co.uk
• https://www.parcel2go.com

Just be sure to do this work ahead of time. Research, find information/prices and put a plan in place. Don’t wait for November to come around and then panic because you’re in deep trouble. Don’t be that seller.

Ok, that’s it for today. I have tried to cover the most important aspects of this whole new inventory distribution thing, but I’m sure I have left something out! If you need any further clarifications, advice or my personal opinion, please leave a comment below the post.

I know that there will be lots of additional rules, regulations and laws put in place the closer we get to 2021, so I will continue to update you on the latest news as it becomes available.

Until next time,
Andrew