European Fulfilment Network [EFN], Multi-Country Inventory [MCI] or PAN-European?
Anyone who has just started selling through Fulfilment by Amazon will no doubt need to make a decision in regard to what kind of ‘fulfilment’ they want from Amazon. In other words, how you want your inventory to be managed and which customers you want to serve with your products. At the moment, you can choose one of the following options:
- European Fulfilment Network [EFN]
- Multi-Country Inventory [MCI]
- PAN-European FBA
We’ll go through them all to appoint the advantages and disadvantages of every option Amazon offers.
What benefits do you have as soon as you start using PAN-European FBA?
Whichever option you choose, you always have the option to sell in all countries where Amazon currently operates, even when using the same seller account. In addition, your products are automatically Prime Eligible in the countries where you sell, which makes it more interesting for customers to order from you than from someone who is not Prime Eligible (want to learn more about Amazon Prime? Check this link!). That’s nice, of course. But it doesn’t say anything about which distribution option to choose.
European Fulfilment Network [EFN]
When you’re just getting started, this is probably the most obvious choice. You choose one country to ship your inventory to and start selling on that marketplace. This is the marketplace you plan to focus on the most. You still do have the option to sell in other countries as well. Our experience shows that people mainly start in the United Kingdom or Germany. If you want to start on Amazon.nl, keep in mind that your stock will be stored in Germany.
- The big advantage of EFN is that you only need to request one VAT number initially, namely in the country where your stock is going. Most people are already overwhelmed at the beginning by the administration that needs to be done when doing business, filing tax returns in two countries is more than enough.
- Inventory management; don’t underestimate how fast the sale of your products can go in one country. Most people who start with Amazon FBA are on a budget and already struggle to keep the stock of one country in order. Let alone the marketing costs you should split across five other countries.
- You have to deal with cross-border fees. If you still choose to make your listing public in other European countries and start selling there, you will have to pay extra to have the product shipped abroad. This can end up costing a lot.
- It’s harder to meet the demand abroad. You may have chosen a particular marketplace because of the language or something, but another country is a much more attractive market. Then, unfortunately, switching is not that easy.
Multi-Country Inventory [MCI] – EXPIRED, READ MORE FURTER ON THIS PAGE
Multi-Country Inventory gives you more freedom to distribute your products across Europe. You can choose in which countries your inventory may be stored to reach customers as soon as possible. In our view, this option becomes interesting as soon as you have mapped the demand for your product (or products) in one country, knowing what you approximately sell per month and being free to expand.
- In the countries where your inventory is located, your customers can faster and cheaper reach you. Cheaper especially because you no longer have to pay cross-border fees for the countries where your inventory is located.
- Amazon ensures that your inventory is distributed among the countries where your inventory may be stored. They do this based on an estimate where at what time an X number of sales will take place. So, you can still send your stock to one country, which saves a lot of costs!
- You’re still dealing with cross-border fees in countries where you sell but your inventory isn’t located.
- You need to request a VAT number in each of the countries where your stock is located. You then are also responsible for filing returns by country. In addition, this may also involve additional costs, such as an accountant or a tax advisor who needs to help you arrange everything neatly.
PAN-European FBA – EDITED, MORE BELOW
Once you’re really growing, there won’t be enough space for your inventory in the countries where your inventory is located and you’re almost considering hiring staff because business goes too well; then that’s the time to go PAN-European. This gives you the opportunity to distribute your inventory across the seven countries in Europe (Germany, France, Spain, Italy, Sweden, Poland and the Czech Republic) to very fast and cheap reach customers. It’s definitely an interesting option, but you have to be ready.
- Europe is at your feet! With no additional cross-border fees, you can reach 741 million Europeans with your products.
- Amazon ensures that your inventory is distributed among the countries where your inventory may be stored. So, you can still send your stock to one country, which saves a lot of costs!
- Wherever your customers are, all your products are automatically Prime Eligible across Europe.
- You need to request a VAT number in all seven countries where your inventory is located. You then are also responsible for filing returns by country. In addition, this may also involve additional costs, such as an accountant or a tax advisor who needs to help you arrange everything neatly.
- Inventory management can become more complex as you now have to monitor from seven countries how fast sales are going and how much you need to have enough inventory. This can especially be a challenge with multiple products.
THE BEST OF BOTH WORLDS, MCI AND PAN ARE MERGED!
In our August newsletter, we already indicated that Amazon adapted the PAN-European programme in 2021, which means that it is possible to use “selective” PAN-European FBA. Previously, PAN-European was all or nothing. Based on feedback from sellers, Amazon has decided to use a new PAN-European model, giving sellers more room to grow without being stuck with VAT obligations across Europe.
This means you can decide which countries you want to store inventory in (previously only possible with Multi-Country Inventory and not with PAN-European FBA anymore). In these countries, you have the benefit of PAN-European FBA (think lower fees).
In countries where you barely sell, you are no longer required to register a VAT number. If you have sales here, you pay the cross-border fees (i.e. without the benefits of PAN).
What can you do now?
This link allows you to specify in your Seller Central Account which countries you want to store inventory in. Make sure you have a VAT registration for those countries.
As soon as you want to store inventory in another European country, you will have to arrange a VAT registration there. You can’t use the OSS for this. The OSS applies to distance sales only.
In addition, Brexit excludes the United Kingdom from PAN-European FBA (until further notice). Of course, you can still send your own stock here.
How to proceed?
Amazon will always encourage you to go directly PAN-European FBA. As cool as this sounds, you really don’t have to do this until you’re ready.
PAN-European FBA requires quite a bit of your inventory management, brings marketing costs across Europe, and you probably have relatively high accounting costs because you have to file returns in each of the countries. For most start-up entrepreneurs, this is too much to ask at the beginning and it will be a hindrance to growth rather than an incentive to grow. We recommend you to make clear to yourself when you are ready for PAN-European FBA. Because as soon as it gets you more to go PAN, of course all bets are off 😉
Questions or need some help?
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