Brexit is here, finally.
Because of Brexit – Britain’s (United Kingdom) “exit” from the European Union (EU), Amazon announced that its UK FBA operation will split from the EU. This means that you can no longer ship all of your European marketplaces order from the UK warehouse and vice versa.
The period from January 31, 2020, to December 31, 2020, is a transition period where EU law and access to the Single Market still remain in force. Total 27 nations belong to the EU and share a common market, customs union, and monetary union. It is the largest economy and block in the world. All EU citizens can live, work, and retire in any EU country. After January 2021, when the UK’s withdrawal will be completed, the UK will become a Third Country and will no longer have free access to the European Single Market.
In this blog post, we will focus on how Brexit will affect Amazon sellers and our Amazon seller consultants have given some guidelines on how you prepare for it, so if you are one of the Amazon UK, Germany, France, Italy or Spain sellers, then stay tuned; this blog is for you.
Amazon’s formal announcement to sellers
On January 31, 2020, the UK left the EU and entered a transition period where existing arrangements are being kept in place until December 31, 2020. The UK is due to formally leave the EU’s Single Market and Customs Union from January 1, 2021.
While UK-EU negotiations are ongoing (including determining what tariffs, if any, will apply), from January 1, 2021, there will be a customs border between the UK and EU, which will have an impact on businesses working across this border.
“Like any business, we consider a wide range of scenarios in planning discussions so that we’re prepared to continue serving customers and small businesses who count on Amazon, even if those scenarios are very unlikely. This is not specific to any one issue – it’s the way we plan for any number of issues around the world,” the UK head of Amazon said in a press release.
How will Brexit affect Amazon?
Amazon is the largest online retailer in Europe, with revenue of $28bn.
Until now, the retail giant was able to keep the fulfillment centers in Europe to a minimum, thereby offering streamlined rapid delivery to the entire continent. However, now because of a no-deal Brexit, the free movement of goods across EU-UK borders will be ceased and this will take much longer for the goods to cross from Europe to the UK and from the UK to Europe. As a result, Amazon will have to set up additional warehouses in the UK and EU to maintain smooth operation and introduce super-fast shipping in more countries.
Amazon had planned to build two more warehouses in the UK, which would have created more than 2500 extra jobs for the UK economy. Moreover, Amazon greatly relied on immigrant workforces in its warehouses, but because of uncertainties caused by Brexit, hiring immigrants could be difficult. How? The right to move and live in the UK was available to the EU citizens already there. However, because of Brexit, many are forced to live and fewer are expected to arrive, which has succumbed to the retail giant’s expansion plans.
Don’t worry; it’s not all doom and gloom. Following Brexit, both UK and EU economies are expected to go through major uncertainties and challenges. It is also anticipated that the UK’s GDP rates would fall and lower trade and investment activities will lead to low consumer spending. I know what you are thinking…how can it be good? Well, if the economy slows down, shoppers will become price-conscious and lookout for great deals and bargains. And where else they will find affordable products than on Amazon.
How will Brexit affect Amazon sellers?
#1: Amazon’s UK operation will split from the EU and will no longer be affiliated with EFN (European Fulfilment Network)
Image reference: Amazon
Sales through the EFN (European Fulfillment Network) will no longer be guaranteed between the UK and EU borders. This means that if your goods are stored in the UK warehouses, then you won’t be able to sell them in Europe. In order to get the “Shipped by Amazon” label on Amazon, your products will have to be stored in and shipped from a European marketplace (i.e., France, Spain, Germany or Italy). Your European products can still be distributed at any of the 5 European marketplaces as before, but on the UK side, there will be restrictions.
In short, to sell products in the UK, you should store goods in UK warehouses and to sell products in the EU, your goods should be stored in any of the EU countries. The removal of the UK from the Pan-EU Programme will create new challenges, one of which is logistics costs and the added responsibility of managing inventory in different jurisdictions.
#2: Extra costs for Value Added Tax (VAT)
To move goods from one to another and storing them locally will require a VAT number of the country in which the goods are supposed to be stored. With EFN, sellers can sell on any of the five EU marketplaces while storing products in any one country. Because of this, sellers only needed one VAT (Value Added Text) number instead of 5 separate VAT numbers. However, because of Brexit, sellers can no longer ship and fulfill products stored in EFN (European Fulfilment Network) across the UK-EU border and will require separate VATs for each country in which their inventory is stored.
#3: UK sellers will need separate EORI to sell goods in the EU
EORI (Economic Operator Registration Identification) is basically used to identify the businesses that import in the UK and EU. EORI numbers also let businesses reclaim VAT in countries where they are VAT registered. But from January 2021, businesses will have to obtain a second EU EORI number to import any goods in the EU. Similarly, if you have an EU EORI number and need to import in the UK, you will require a GN EORI number.
#4: Custom & clearance
Starting from January 2021, all the imports and exports in and out of the UK border will be subject to stringent custom declarations. As a seller, you can either complete these declarations yourself or can hire an agency to do it for you.
- Amazon’s UK FBA centers can no longer be used to ship orders in Europe
- Sellers will no longer be able to send inventory to fulfillment centers in the UK for Amazon to distribute them for storage in the EU
- 3P seller’s product will no longer be eligible for super-fast 2-day Prime shipping and won’t be visible to millions of customers through the EU
- Stocks already sent in the Amazon warehouse in Europe can still be distributed to other European warehouses but can’t be sent back to the UK
#5: Brand registry
Brands having only EU trademark are at present protected across UK and EU marketplaces. But post-2021, these brands will no longer be able to report any infringements in the UK marketplace and hence will have to register both their UK and EU trademark. To update your trademark, log into your Brand Registry account and follow the instructions under Contact Brand Support. For more information regarding brand registry, contact our Amazon Marketing Consultants.
How can Amazon sellers prepare for Brexit?
By now, you are already aware of how Brexit is affecting your FBA operations and sales. But if you wish to continue to sell in both the UK and the EU in 2021 and beyond, you, just like Amazon, will have to split your business. The retail giant recommends storing some inventory in the EU and some inventory in the UK. This ensures that you have enough stock on either side of the custom-borders. This means that sellers based on mainland Europe, UK or outside the European region (like sellers from the US and China) should send stocks in atleast two warehouses – one in the UK to sell to UK customers and one in any of the EU countries to sell across mainland EU.
2021 is just around the corner and Brexit is happening. Instead of panicking, it would be best if you face the situation and start preparing for it. Our team at eStore Factory can help you understand how Brexit impacts your Amazon business and what steps you can take to make yourself and your brand ready for it. Reach out to one of our Amazon consultants now!