Calling all Amazon sellers, are you ready for Brexit?

“Brexit means… what, exactly?”

Four years after the Brexit referendum, and just over four weeks away from the deadline for the UK’s transition period, this is still a question I receive from clients on a daily basis. 

More so than any other marketplace, Amazon is at the forefront of these conversations. Not just because it’s the biggest, but also because it performs the majority of the packaging, storing and dispatching processes for a vast number of businesses.

So, how are things now? How is that going to change by the end of the year? And what can you do to protect your European business on Amazon?

First things first, how do things currently work?

Until now, there have been two programmes that businesses can use to sell to EU customers through Amazon.

The first is the European Fulfilment Network (EFN); this allows businesses to store stock within an Amazon UK warehouse while still distributing those products to customers in Europe. Amazon charges a small cross border fee for the trouble but, by and large, the EFN is the easiest way to access EU customers.

The second is Pan-European FBA, which overcomes cross border costs by allowing you to store stock in EU fulfilment centres. By moving your stock as close to the end user as possible, Pan-European FBA allows you to provide same/next day shipments all across the EU, and is without doubt the best way to scale in Europe.

Sounds good, so how will Brexit change that?

It’s bad news for any business relying on the EFN, as Amazon is shutting down this programme completely. That means, if you still want to access EU customers with Amazon, you will have to go through Pan-European FBA.

However, because Amazon is stopping transfers of stock between the UK and Europe, Pan-European FBA will no longer allow you to serve these two markets from one unified European stock holding. Instead, you will now have to split your stock, meaning one inventory for the UK, and one inventory for the EU.

Obviously, this isn’t exactly an efficient way of operating. However, if you want to serve Amazon customers with Prime, then you have no alternative choice.

If I don’t have a choice, what do I need to do?

Now that the EFN is no more, accessing Pan European FBA should be your top priority. But splitting your stock is only one part of the challenge. Remember, as soon as you have stock sitting in any country in the EU, you will need to register for VAT in each of those territories - even if you haven’t sold anything.

It’s complicated to do it yourself. So why not let Amazon make it easy for you?

As part of VAT Services on Amazon, Amazon will handle all your VAT registrations, in all the relevant territories, as well as filing your returns. All you have to do is upload the relevant documentation. What’s more, because Amazon is providing this service at such a scale, they’re able to offer it at dramatically reduced prices - they even have a promotion available right now where UK businesses can get the first year of service free.

The point is you can continue to access EU markets while saving thousands of pounds. All you have to do is start the process, sooner rather than later.

What are some of the key dates I need to be aware of?

The UK’s transition period ends on the 31st December, but there a few more dates and deadlines to be aware of before then:

• December 18th: Pan-European FBA inventory transfers will stop between the UK and EU. To maintain stock levels, you will need to send inventory to fulfilment centres in the UK and the EU.
• December 21st: Cross-Border Fulfilment via EFN and Pan-European FBA will start “winding down.”
• December 28th: Cross-Border Fulfilment via EFN and Pan-European FBA to stop completely.
• December 31st: Inventory removal orders for cross-border inventory stopped in November, but any removal orders created before this date will continue to be processed until the end of the year.

What are the implications if I ship to EU customers via MFN (merchant fulfilled network)?

The first point to make here is that merchant fulfilled orders (ie. orders that you fulfil yourself rather than through FBA) can continue to be sent across the UK-EU border, but it is the seller's responsibility to ensure all duties and tariffs are paid prior to delivery to the customer. Sellers also need to be aware that there will be additional requirements for shipping to customers across a customs border, such as customs clearance documentation and compliance with new labelling requirements.

If you haven’t already spoken to your carriers to determine how they can support in moving goods across the UK-EU border from January 1, 2021, then this should be an utmost priority. Failure to meet all the necessary requirements for cross border shipping will likely result in delays to your merchant fulfilled orders, the offshoot of which will be negative feedback, poor metrics and even a potential account suspension.

Marketplaces, and Amazon in particular, have very strict metrics around delivery timeframes and negative feedback thresholds. Amazon has only been able to scale because of how good their service is in terms of customer experience. As soon as your products stop reaching your customers in the time frames you say, they will have no issue pulling the plug. To mitigate this, consider temporarily increasing handling and shipping times to account for potential delays until the confidence is there that the customers will receive their orders within desired timeframes.

How can SHIFT help me prepare?

There are three main ways we are helping prepare businesses for these Brexit transitions. First, we’re running the VAT Services on Amazon process for clients, working with them to ensure they pull all the relevant documentation together and that, ultimately, the service works for them. 

Second, we’re helping businesses plan for how they’re going to split their stock between UK and EU holdings. There’s no point sending stock over to Europe on a weekly basis; it’s much more cost-efficient to transport three months worth of stock ahead of schedule.

Finally, we’re working with partners and couriers to help businesses transport their stock to Europe. Whereas Amazon previously handled all of this, we’re bridging that gap to ensure your inventory will still find its way to those European fulfilment centres.

If you’d like any more info on how Brexit might impact your ability to access EU customers, please don’t hesitate to get in touch with a member of the SHIFT team.