How to expand into the US on Amazon (and why you should!)
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At e-Comas we’re all about global expansion.
There’s never been a better time in history to expand your retail operation worldwide - the major eCommerce platforms, particularly Amazon, make it relatively simple.
And with the right preparation and knowhow, there’s no reason why you shouldn’t be selling on Amazon in the US as well as in Europe.
Here’s how to go about it.
Why expand into the US?
Amazon.com is big: in fact the second biggest marketplace in North America, after Walmart.
Total sales figures for Amazon in the US are $574bn, compared to only $51bn in Europe: the market is more than 10 times the size. Almost 50% of all eCommerce in the US happens on Amazon.
And, that vast market is only one country. There are no borders to traverse, so it’s simpler to sell over a much bigger area, with only one currency, and one set-up for tax and compliance.
There are other great reasons, too. Amazon is extremely influential in the US: it’s one of the most trusted brands in America, with more people searching for products first on Amazon than on Google.
Prime membership is enormous, with 187m members each spending an average of $1,400 per year; moreover, products with the Prime badge see as much as a 60% lift in sales compared to the same product that is not Prime
In summary, if you sell on Amazon in the US, you’re opening up a massive growth opportunity.
But there are a few potential pitfalls to look out for.
What are the challenges of selling on Amazon.com?
The main challenge is ensuring you can ship your product across this massive country within two days, and six days a week, to ensure you’re eligible for Prime. Prime provides a massive boost to conversion rates, so this is really important.
We’ll skip talking about the Vendor program here, because it’s not much used in the US now except for the largest brands.
There are three ways to sell as a Seller on Amazon.com:
- Fulfilled by Amazon (FBA)
- Fulfilled by Merchant (FBM)
- Seller Fulfilled Prime (SFP).
Challenge 1: FBA, FBM or SFP?
Let’s look into what those terms mean.
FBA is when you put your stock inside Amazon’s fulfilment network to be shipped by Amazon. This is the easiest way of becoming Prime eligible.
FBM is when you ship your stock to customers yourself. You can win the Prime badge as FBM, which is what Seller Fulfilled Prime (SFP) is - but to do so you need to show Amazon you can consistently deliver within one day or two days.
We think it’s pretty important to be on Prime: many customers search for items filtered by Prime eligibility, which means you won’t get any traffic at all from them unless you’re able to ship within two days.
It may seem a no-brainer to get straight on FBA, let Amazon take care of all your fulfilment and join Prime, but it’s not the most cost-efficient: getting your inventory levels right, to ensure you neither go out-of-stock nor incur heavy inventory fees, is a delicate balancing act, especially when you first enter the market and aren’t sure how your product will sell.
It can be much more cost effective to do FBM, even with one- and two-day shipping for Prime eligibility.
We recommend mixing them, and gradually feeding your top-selling products into FBA, building a halo effect on your brand.
Our partner DaVinci has built fantastic technology to review datasets on your products and the market, and tell you what your unit economics specifically would look like, helping you decide what assortment should be in FBA, FBM or SFP.
Corey Apirian from DaVinci describes the process as “a three-part strategy of what item you’re selling, versus where that inventory is placed, and ultimately, how you fulfil it.”
Challenge 2: Shipping and logistics
Logistics for sellers on Amazon US are complicated by the size of Amazon’s warehousing and delivery network. Over the last few years Amazon has moved to a regional fulfilment strategy across the US, which means there’s more heavy lifting for brands to do in terms of:
- Knowing the Amazon fees for your category and item type
- How items need to be packaged and labelled
- How much inventory you have - too much incurs greater inventory placement fees.
If you’re going for SFP, you need to know there are only four carriers you can use to ship your products: US Postal Service, UPS, FedEx and OnTrac. There are another 50 or so carriers you can use for FBM, but only those four will make you Prime eligible.
Challenge 3: Amazon.com is extremely competitive
You need to use every tool at your disposal and make sure you’re using social media and multi-platform ad strategies, because Amazon.com is extremely competitive.
Michael Yanez, e-Comas’s Head of US Business Development, says: “Social media is very important to shoppers and sellers in the US: you need to go in with a full-funnel marketing strategy and budget to make sure you can compete. Video advertising also works really really well in the US.”
We strongly recommend using Amazon Posts, which should tie in easily with the rest of your social media strategy.
Your ad budget for Amazon US should be a little higher than that for Amazon EU: we recommend adding an extra 5%.
Challenge 4: Differences between US and EU
Amazon.com has a lot more tools for sellers to use than its European counterparts. Amazon often rolls out beta tools in US Seller Central many months before they are rolled out in other regions. This makes it more complex: there will be a lot of tools you’re unfamiliar with, so having someone who’s familiar with Amazon.com is almost necessary to make the best of it.
There are lots of cultural differences between the US market and the European market: you can’t use the same keywords for SEO, not even your British keywords.
There is no VAT, which simplifies things, and Amazon collects taxes in most states - so you don’t have to worry too much about tax. But there are some tax obligations, and we recommend you choose the right partner to help you understand and assist in managing it.
Lastly, depending on which country you’re in, your country’s tax rules may require that you have an importer of record to ship products into the US: another reason to partner with an experienced partner, like e-Comas.
Top tips from e-Comas
Tip 1: Get your brand registered on Amazon
If you have a trademark anywhere in the world, you can join Brand Registry to protect your intellectual property. Once you’re in Brand Registry, you can not only report sellers of counterfeits, but also control the content your distributors are putting out.
So for example, if your existing North American distributor is selling your product under the same ASIN as you, but their product detail pages don’t come up to scratch, you can clean up those pages and optimise for SEO.
There are free marketing opportunities available through Brand Registry. You get a Brand Store; you can enhance your listings with A+ content; you open up all of the advertising options, such as Sponsored Brands. Find out all the many benefits of Brand Registry in our white paper.
Tip 2: Audit your business before you move into the US
You need a full market analysis and you need to prepare your team.
Your analysis should tell you:
- What’s your ad spend budget?
- Who are your customers?
- What’s your likely market share?
- Can you be competitive on price?
- Which ASINs will you set up? Which will be FBA, which will be FBM?
Tip 3: Start a new Seller account
Don’t use your existing EU account.
It’s a new environment, with different features and tools, so it helps to have a new separate account. If you make any mistakes on your US account, it won’t affect your EU account - you don’t want to risk account suspension across your entire operation.
Tip 4: Use an agency or partner
There are tools you can use for market research, such as Helium 10, but they require knowledge to use them. Using a good eCommerce agency, like e-Comas, almost always results in a successful expansion with strong ROI.