What is Pan-EU and EFN?
Pan-European Fulfilment by Amazon (Pan-EU) allows sellers to fulfil orders across eligible European countries from a local fulfilment centre (FC) at no additional cost per sale. For example, inventory booked via an Amazon.de account to an FC in Berlin would then be distributed across the EU based on Amazon’s demand forecast.
This is different to the European Fulfilment Network (EFN), where orders are sent from a domestic fulfilment centre to the country from which the order was placed. EFN has a lower barrier to entry than Pan-EU, but the cross-border fulfilment fees can kill margins and slower delivery times can result in negative buyer feedback.
How will Brexit affect these programs?
When the UK leaves the EU’s Single Market and Customs Union on January 1st 2021, the country will be removed from Pan-EU and UK-EU FBA orders will no longer be fulfilled via the EFN. Pan-EU will remain to serve the following 6 countries: Germany, France, Spain, Italy, Poland and the Czech Republic.This has major implications for both UK and EU Amazon sellers.
In order to gain access to the Pan-EU market, UK sellers will now have to send inventory directly to one of the 6 EU countries on the program. This adds complexity to the fulfilment process, as sellers will now have to split stock between the UK and the given Pan-EU country. Similarly, EU Sellers will have to send separate shipments directly to the UK.
There is no telling if these changes will be permanent and it is understandable that Amazon has verged on the side of regulatory caution while UK-EU trade negotiations are ongoing.
The benefits of Pan-EU
The primary benefit of Pan-EU is that it simplifies logistics and fulfilment processes for sellers scaling into new locales. Amazon effectively handles inventory management across each of the Pan-EU countries. This is valuable as balancing distribution across 6 locales simultaneously can be complicated especially when entering new markets where there is no historical sales data to base demand.
Amazon takes care of customer support in the local language and listings will earn a ‘Prime’ badge, which is known to increase conversions by gaining buyer trust and the promise of a speedy delivery.
When is the right time for Pan-EU?
Before considering Pan-EU, sellers will ideally have established strong demand for their products in at least one locale. Sellers must also factor the capital required for additional inventory and the legal costs associated with enrolling into the program.
Pan-EU sellers are obligated to hold VAT numbers in each of the 6 EU countries. This necessitates the cost of registration plus the ongoing expense of filing your taxes throughout the year in each and every country.
In some cases, it is better to test out individual markets by sending stock directly to one additional EU country and selling via domestic FBA channels before scaling out across the entire Pan-EU network. This offers sellers a relatively inexpensive method to test demand but becomes complex due to the separate fulfilment, the need for listing translation and customer support in each country.
Once tax compliant, what are the next steps?
Once your tax obligations are met, the next step in the process is to localise your product pages through a combination of native keyword research and translation of copywriting into the relevant language. The copywriting must read well for the local audience and pay careful attention to cultural nuance.
If you are considering embarking on this process, we at Expert Edge have an experienced team of experts who can help recommend, guide, and execute horizontal expansion into marketplaces via Pan-EU or otherwise.