The European Union and the United Kingdom parted ways in January 2021 through the Brexit agreements. The United Kingdom left the single market. The impact of Brexit is real since then for Amazon sellers using FBA (Fulfilment by Amazon) services. Read more about the impact on VAT here.
A key element of FBA is that Amazon not only takes care of packaging and shipping, but also the distribution of the products within the European Union based on their popularity. In other words, the eCommerce giant moves stock of your products from one distribution center to another distribution center in another country without noticing you. The use case focuses on how many units of a specific product merchants sell in which Prime country. Amazon does not leave semi-empty trucks move around Europe. They will move products to position them the closest to customers.
As an example, if you ship sun screen protection to a distribution center in the Netherlands, the likelihood that sales in Italy or Spain is higher than in the Netherlands. They will move the merchandise to a location in Italy or Spain. By doing so, Amazon fulfils customer orders from a location the closest to customer’s address.
Amazon UK has split from EFN
EFN is Amazon Fulfilment Network. In short, the company headquartered in Seattle will no longer transport goods of British sellers to the European locations. Vice versa, they will not move goods from European distribution centers to the United Kingdom.
Consequences for sellers
The consequences of Brexit are:
- pause of automatic stock transfer between the EU and the UK
- FBA orders may not be executed when shipping from the UK to the EU and vice versa
- import of goods to the UK requires separate EORI numbers (Economic Operators Registration and Identification)
- goods sold to the UK by a foreign seller falls under the VAT regime (see VAT applies to online marketplace shipments of goods to the UK for more information on this topic).
Brexit does not have an impact on:
- pan-European orders outside of the UK. This means that FBA orders for products stored and sold in France, Germany, Netherlands, Sweden, Italy and Poland are not affected by Brexit.
Minimising the impact of Brexit
The non-exhaustive list here below highlights actions that sellers can take to mitigate the impact for cross-border sales:
- Shut down your Amazon UK marketplace (dramatic action).
- Split stock into two storage locations. Store items within the United Kingdom as well as a European logistics center. The downside is that is requires you to manage 2 stock locations for the same SKU. Also, it forces you to run a dual replenishment model with a dual shipment scheme.
- Switch to FBM. FBM means Fulfilment by Merchant. In other words, store and ship products yourself or through a 3rd-party logistics company. The downside is that will lose the Prime logo. Furthermore, it means that your chances to winning the Buy Box go down (Seattle prefers FBA sellers for the buy box).
- Mix & Match FBM with FBA. You may want to fully run on Amazon rails in the European Union and then use your own FBM logistics for the UK (for sellers with their headquarters on the EU).
Has Amazon made billions thanks to Brexit?
The London Economic published an article early February 2021 claiming that the eCommerce giant is set to earn billions from Brexit (link to the article here). Based on their research, small UK businesses are shifting to FBA for selling into Europe. They claim that “Amazon will be faster in overcoming distribution obstacles”. Furthermore, “UK businesses are left with little choice” given the logistics, VAT and cost burden that Brexit imposes on them.
I personally believe that the London Economic is right in relation to the mechanics of why more businesses use FBA. However, it is a fact that UK exports dramatically sunk from January 2021 onwards. According to Bloomberg, food and drink exports to Germany, Ireland and Italy fell by more than 80% (article on Bloomberg.com 22nd March 2021).
Keep up with cross-border trade
The current pandemic has boosted online sales. Sellers should continue to serve the UK market. Running a dual track UK-EU is complex but is the way to go. The UK is one of the largest market in the EMEA region. Also, it is one of the most mature one.
Read the Amazon Brexit Guidance documentation during a rainy day. If you are interested in value-added tax for marketplaces, read this blog post.
Hope you enjoyed reading. Stay well and safe!
PS: this article was also posted on LinkedIn
Disclaimer: this post does not deal with the additional complexity for sellers in the Republic of Ireland (import fee deposits) or the special of Northern Ireland).
