The ins and outs of international expansion for FBA sellers

An interview with Bryce Cressy, Head of Partnerships and Affiliates at Zee.

My name is Bryce Cressy. I run the partnerships and affiliates team at Zee. I come from a finance and investment background where I started in banking and strategy, and subsequently moved over to the eCommerce industry about two years ago as a partnership manager. I now find myself leading the Partnerships and Affiliates division at Zee.

What we do at Zee, we’re an eCommerce import specialist, assisting established eCommerce sellers with their global expansion, taking away all the admin-heavy tasks such as logistics tasks, customs, as well as product compliance and automating it, providing a turnkey solution, one point of contact for an eCommerce seller to expand globally.

Can you explain FBA and the other fulfillment methods eCommerce businesses can use when expanding internationally?

Fulfillment by Amazon, FBA, is an outsourced form of order fulfillment. So it’s basically a way to get goods to the end consumer and have a place to store, pick, and pack your goods. So basically, when a customer sends an order through, or purchases a good on Amazon, the goods will already be housed at one of Amazon’s many order fulfillment centers, the FBA centers hosted around the globe.

The warehouse will then receive the order, pick, pack, and ship the order to the end customer, regardless of whether or not it comes from as long as that FDA center is within the country where the order came from, naturally. There are many different types of fulfillment models, FBA being one of them, FBM being another, which is fulfilled by merchant, which just allows that eCommerce seller to be a bit more flexible with their fulfillment model and their fulfillment methods and use external providers instead of using Amazon, as well as Dropshipping. That’s another form of performance, but that is more cross-border.

But today we are, and Zee itself, we are specialists at helping sellers who will fulfill their goods either via FBA or via FBM.

Why should sellers expand their businesses internationally?

FBA sellers can get a lot out of expanding their businesses internationally. A couple of things that come to mind are, first and foremost, untapped markets. So if you are a US based seller and you’re only selling within the US, there are several Amazon marketplaces for you to showcase your brand, showcase your products, get into a market that can be largely, and often is, untapped for a certain product category, as well as it allows the eCommerce seller additional revenue streams.

So you’re not only getting revenue from the US, but you’re getting it from the UK, from Germany, from Japan, wherever you are selling your goods. Another element to it would be the US market, again if we’re talking about the US, is extremely, I want to say condensed. There are a lot of sellers, there’s a lot of competition. And so you have a lot of 3P sellers that are competing for the same product, for the same product category, and often competing on price, on listing optimization, trying to win the buyer box.

Often the UK, Germany, wherever else you’re looking to sell, there is less competition. So it is a little bit easier to penetrate that market. But also, you have a bit of risk diversification that comes with expanding into new markets. Because global economies, while often theoretically they do move in very similar fashions, especially the developed economies, but there is a form of not keeping all your eggs in one basket if you are expanding into different countries and selling in multiple markets, because the currency fluctuations, as well as the buying power of the consumers in the different markets will invariably not be all the same. So it allows you some form of leeway when it comes to market downturns.

What is the most important thing that sellers should know before expanding internationally?

So there’s a couple of things that you should know if you’re an FBI seller looking to start expanding internationally. Some of the things that you need to know, first of all, that you must do your homework. I think just because your product is selling really well in your local market doesn’t necessarily mean it’s going to sell as well in a foreign market.

As much as we like to provide a turnkey solution, an easy solution, for a seller to get into another market, it doesn’t necessarily mean that their product is going to sell out in that market. So I would definitely say, do your product research, do your market research, do your homework in terms of what compliance needs are for your product, what your product needs in terms of representation, documentation, does it need visual testing, as well as are there any concerns at customs.

So, will I need an importer of record? Will I be able to declare this product at customs by myself? What are the things that I need to do from a compliance, as well as a risk perspective, as well as a market research perspective before I start looking to trade into this country?

And then once I’ve kind of checked all those boxes and I’m still satisfied that the product is going to do well, which often is the case, then they should be ready to get into that new market.

What is an importer of record? Do I need one to sell internationally?

An importer of record is the legal responsible person, or the legal responsible entity, that is legally liable for that import. So the person who is bringing the goods into the foreign country in their name, the company responsible for paying the duties and taxes, responsible for the legal audits, responsible for any inquiries that can go back 5 to 10 years after the customs clearance process. So it’s that physical entity that’s based in that local country that can be responsible for the imports.

The question of do I need one is very simple. If you don’t have the physical entity that is based in the destination country, the country that you are looking to sell into, i.e. you’re a US based seller looking to sell into the UK or into Germany, you will need someone to act as the importer of record if you do not have an entity set up in that country.

Often, entity setup can be very tiresome, very admin based. So an importer of record provides you an easy solution to get your goods into the end country legally and compliantly.

Do sellers need to set up an entity to sell in another country?

I think not, mainly because entity set up comes with very, very admin intensive tasks. You need to have directors, you need to pay forms of membership monthly for that, it needs to be set up. And it’s a lot of hassle when you can actually get someone else to act as that entity for you.

Or in some countries you can just get a number that allows you to import on your own behalf. But I wouldn’t say [you need to set up an] entity, just because the importer of record as well as merchant of record capabilities offer you the advantages of having an entity without the admin constraints that you have to ensure compliance monthly for that same entity.

What is product compliance and do sellers need to worry about it?

Product compliance is most certainly something that sellers need to worry about. It is a form of compliance that is relevant to your specific product tag, as it says in the name. But often people don’t actually know what product compliance entails. You can be compliant to imports, you can import a record set up, you can get your customs fine, but your product may not be legal to sell in that market.

So product compliance just refers to having the correct representation, having the correct authorization for those goods to be sold in that destination country. Certain types of goods, i.e. food supplements, need to have quite stringent product compliance tests done to ensure that they have someone legally responsible for the products in the destination country, as well as they have certain labels, markings on their labels, their labels are filled out correctly, as well as they have done certain safety tests and requirements to satisfy that their product is indeed compliant.

What do sellers need to know about customs clearance when selling internationally?

Customs clearance is basically the process that allows your goods to get into a country legally. This means compiling them and filing the documents at customs, ensuring that the goods are valued correctly. Paying their duties and taxes at customs, ensuring that the correct ownership is applied at customs, so that the people who are accepting the goods are either owning them or acting on behalf of the owner of these products.

But in a nutshell, it is ensuring that all the importation documents are consigned correctly in the correct format, so that admin-wise everything is satisfied and the customs clearance happens legally. It’s just a way of getting goods compliantly into a country, tracking those goods, valuing those goods, and ensuring that the government that the goods are going into, that jurisdiction of the government, they are compensated correctly and accurately for those goods being sold in their market.

Do sellers need to think about tax requirements when selling in a foreign country?

Regardless of what country you are selling into, you need to think about the tax requirements. That’s generally, when it comes to income, one of the things that is in the forefront of your mind, whether you are earning cash in a new country and wanting to bring that cash back over to your local country, you need to think about the tax requirements.

If you are selling goods in that market, who are you paying the tax to? Do you need to pay any form of tax? Why do I need to pay tax? So I definitely think it’s something that every seller needs to think about going into a foreign country.

What are the different types of taxes that a seller should look into when expanding internationally?

There are a number of different tax requirements that need to be satisfied in certain countries, such as your local VAT registration, your OSS, and your IOSS. OSS and IOSS, that is specific to the EU. And it’s something that a lot of people need to know about because of how big that EU market is becoming.

The difference is a local VAT registration, that is enabling a seller to store and sell goods in that country. So you need a local VAT registration in the UK and the EU. In South Africa and Canada it’s GST, and in Australia it’s GST. It’s just a form of indirect tax that you have to satisfy when you’re selling goods in that market. And OSS, that stands for one stop shop. IOSS stands for import one stop shop. They’re very similar in how they function within the EU.

The OSS allows a seller to have a local VAT registration in one country and attach an OSS, and that allows you to sell throughout the EU without having to get any local VAT registrations, in any of the other EU countries. And that is if you are selling goods that breach the threshold of €150 in that country, then you need to have that OSS. If it is below €150, then you would qualify for an IOSS which allows a non-EU-based company the ability to sell compliantly and dropship goods into that country that up and know that €150.

So it’s just a way to streamline the tax regime in the EU, and it’s been very beneficial for non EU based companies. And the lovely thing is, as I said, you only need one VAT registration during that time, in one country accompanying the OSS and the IOSS.

Can I sell into the UK and EU using the same entity?

Since Brexit happened, a UK entity can no longer sell into the EU without having an importer of record, without having VAT registration set up in the EU and vice versa. An EU company cannot sell into the UK without having that VAT registration, that EORI (Economic Operators Registration and Identification) number as well as that importer of record. It’s kind of hurt a lot of businesses because of that, but it’s created a lot of business for other people because of that.

And generally, if we have to talk about non-UK or non-EU, it’s very much similar. You can set up instances in the UK and EU, but if you haven’t got that set up, or you haven’t got that importer of record, you can’t sell compliantly into those countries

What are the steps a seller should take to start selling in a new market?

Every seller is different in terms of how they will start their journey. Generally I find that the best thing is to do your market research to understand which country you want to get into and understand that that product will satisfy that market’s demand, and there will be enough competition to be relevant, but not too much competition for you to be struggling to get market share in that market.

You need to consider setting up either your Amazon account store or setting up your web shop, if you’re selling through a web shop. You need to understand the compliance requirements for your product in that country to understand do I need to perform more additional safety tests? Do I need to appoint authorized representatives? Do I need to think about customs? Do I need to have an importer of record?

I need to think about how exactly am I going to get my goods to that market. Am I going to use a courier or freight forwarder? How timely is my shipment? How heavy is my shipment? That will take into account exactly what form of transportation you are going to use.

Do I need to use air, sea, or land shipment? What is the best form of freight for me, and the cheapest form of freight for me, and the most efficient form of freight for me? As well as, naturally, am I going to be going with FBA or FBM?

If I’m going by FBM, who’s the correct warehouse to satisfy my requirements? And then, naturally, how am I going to drive traffic into this foreign market? Am I going to leverage forms of off-Amazon advertising? Am I going to leverage to the best of my ability an external provider who can optimize PPC and my DSP? As well as, naturally, do I need funding to get into this market? And how can I best leverage current providers’ funding benefits to get into these foreign markets?

That’s quite a few things that I listed, but it’s all things that a seller needs to think about when they’re going into a new market.

What is the biggest challenge for sellers looking to expand into foreign markets?

The biggest challenge for FBA sellers looking to expand to foreign markets is navigating the complex world and complexities of VAT, as well as customs, understanding what is required in that customs process, and what is required to remain tax compliant.

And I think a big challenge is the one to set up entities, which we’ve already discussed quite a bit. But those challenges are very foreign to a lot of FBA sellers because it’s not something that they may deal with in their local market. So wrapping their minds around something new in a different market often takes a little bit of hand-holding to help them really get into that foreign market.

What is the most common misconception about international expansion?

A common misconception about international expansion is that every market has the same compliance requirements for my products. So if my products are compliant in one market, they’re naturally going to be compliant in another market, like a one-size-fits-all approach, which is often very wrong.

Every market that you are going into will have their own unique compliance requirements, will have their own safety testing required, will have their own nuances that you need to do your research on and you need to understand what those requirements are in foreign markets. Because the FDA operates very differently to the Food Business Operation in the UK, for example. And certain electronics in the US are treated differently to electronics in the UK, which are treated differently to electronics in Germany. So every market has their differences when it comes to compliance.

What is the most common cause of delays and/or stuck shipments when shipping internationally?

The most common cause of delays and stuck shipments that we are seeing when sellers are shipping internationally are, it’s actually quite sad, because it’s often very, very, very much the same. And we’ve actually experienced this a lot in the last two months with people trying to get their goods into a foreign market just before Black Friday, or meeting some deadlines.

Often it is having an incorrect importer consigned on the documents. So what is seen at customs is different to what is seen from the freight forwarder, which is different to what’s seen for the courier. So you have all these different information streams that fold into customs, and often they are not matching. And when information is not matching, that is when shipments get stuck, and you need a third party to come in and understand what’s been given, what is the situation, and how do we fix it.

And generally it is that the customs documents are consigned incorrectly and they don’t have an authorized representative for their product in the destination country, or their importer or recipient of their goods does not match what the destination is on the air waybill or the bill of lading. Those are all very much the commonalities that we’ve seen when customers are getting the goods stuck at customs.

How can sellers avoid delays when selling internationally?

Be sure that you have as much information as possible and that you work with a customs broker who is fluent in the form of customs in that country.

I think if you are also dealing with a language barrier, Google Translate is not going to work for that. It creates a lot of nightmares itself. But I definitely say work with a customs broker, work with someone who knows about customs in that destination country to ensure that your goods are not stuck, because the fines that come with goods that are stuck, the goods that are destroyed, the goods that are sent back, that is lost revenue, that is lost inventory, that is opportunity cost of sales lost.

Which foreign markets are the most promising choices for sellers looking to expand internationally?

The two most common markets that are booming for US based sellers looking to sell into that next market would be, naturally Germany, which is the second biggest Amazon marketplace.

The UK is also a fantastic market. The dark horse markets that are coming in, so it is certainly the UAE. That is becoming very, very popular as well, and there’s a lot of investment, a lot of foreign investment that’s been happening in the UAE, especially with the Amazon marketplace.

And I think the infrastructure there is really getting to a point that US-based sellers can take advantage of.

As well as Japan. It’s a very different form of market, a very different culture. But there is tremendous opportunity there, just from how mature their eCommerce market and the technology is, and the propensity for Japanese consumers to use online forms of shopping.

And I think we all know it, but Turkey as well is also becoming a massive market for eCommerce, for exports and imports into Turkey.

How can Zee help make the process of selling internationally easier?

Zee is an eCommerce import specialist that provides an all-in-one solution for an eCommerce seller, an established eCommerce seller, to expand into a foreign market. Zee will take care of your logistics, will take care of your tax, will take care of your customs, as well as ensure that your products are compliant going into that new market.

And we will help get a seller registered with VAT or GST, we’ll file their taxes on a monthly basis, we’ll provide technology for them to track where they are in the process. And we will allow a seamless customs clearance experience. We will act as the importer of record. We will physically get the goods from origin to destination at the cheapest price possible. And we will also ensure and analyze what test and documentation your product currently has, what is needed at the import country, and we will fill the gaps in between and will do everything on your behalf.

And this is all done through one point of contact at Zee, enabled by the best technology in the game to really give an established brand that ability for a premium, customized, and personalized solution to expand the enterprises into foreign markets.