How Can Sellers Sell on Amazon in the USA? A Short Guide
Revenue of Amazon in Germany 2019: $22.23 billion. Revenue of Amazon in North America 2019: $170.77 billion.
These figures illustrate what everyone already knows: the revenue potential on Amazon.de is already significant – but compared to the potential on Amazon.com, it is almost laughably small. It is no surprise that many German sellers are eager to expand their business to the home country of the corporation. However, to sell successfully on Amazon USA, a considerable amount of knowledge is required.
The peculiarities of the American market deter many marketplace sellers in this country from daring to internationalize. The hurdles are too high, and the concerns are too great. But is that really the case? Do sellers need to invest the same amount of money to establish an American company and ideally gather an army of US-experienced lawyers to be able to sell on Amazon in the USA?
We watched the popular YouTube webinar by quantified markets featuring Till Andernach, the expert on expanding to Amazon.com, and we summarize for you why the effort is worthwhile and how difficult (or easy?) it really is to expand your Amazon business to North America.
Why German Sellers Should Sell on Amazon.com
The perhaps most compelling argument for internationalization towards the West is that the USA is the largest market economy in the world with a massive e-commerce sector. Currently, Amazon holds about 50% of this e-commerce market. This presents a significant potential for German companies on Amazon USA: by selling on Amazon.com, sellers gain access to an Amazon marketplace that is twice the size of all other Amazon marketplaces combined.
For Till Andernach, however, there is another component to consider: the diversification of the risk profile. For sellers who generate their main revenue through Amazon, an account suspension or a drop in sales on the German marketplace is akin to a disaster. Many sellers therefore want to establish a second source of income.
And this can even be done without venturing into new platforms. No Amazon seller needs to familiarize themselves with other sales channels, such as eBay or retail. On the contrary: Amazon sellers can transfer what they already do well to Amazon USA. Sellers operate through a separate seller account, allowing them not only to prepare for revenue fluctuations on one of their marketplaces but also to better compensate for the suspension of a Seller Central access. Account suspensions across seller accounts are hardly to be expected, even with linked accounts. Till Andernach is not aware of any such cases. It should also be noted that the American seller account is similar to the European one in that it is a “Unified Account” that includes not only the USA but all of North America.
Selling on Amazon in the USA: Hurdles and Effort
Many Amazon sellers hesitate to take the step into the USA. And indeed, there are a few hurdles that need to be overcome. Overall, however, it is easier to sell on Amazon in North America than most people believe. In general, the complexity of entering the market in the USA depends on the product, the associated product liability, and the legal regulations that must be adhered to.
In contrast, topics such as business registration and tax compliance in the USA are often associated with less effort than in Germany. We will now look at the various focal points that are important for sellers who want to sell on Amazon in the USA.
Creating Offers
Creating offers is essentially not much different than in Europe. Just like with PAN-EU sales, you should ensure that the product detail page is written in the appropriate local language, which means in English for the USA. Cultural differences should also be taken into account when creating offers. The process is the same as in Europe: select the appropriate target country and upload the inventory file template.
Goods Handling
One particular aspect is the handling of goods. First, the goods must be imported into the United States. Confusion can arise regarding the designation of the exporter and the importer of record. Ultimately, the seller who brings the goods into the destination country is the importer of record. If the goods come from their own warehouse in Germany, it may even be the case that they are also the exporter of record. This can lead to confusion even with established international freight forwarders, as Till illustrates with an example in the interview. One thing should be clear: even if the goods go to Amazon’s warehouse, Amazon itself is never the importer.
Sales Tax in the USA
Most Amazon sellers likely have concerns about sales tax. Similar to the European Union, sellers are only liable for tax in the states where they have inventory stored. The good news is that Amazon already handles the collection of sales tax in many states. In these states, sellers do not need to worry about anything further.
In states that do not appear on this list, sellers may need to apply for a tax identification number and enter it in Seller Central if they want to sell on Amazon USA. However, this does not necessarily have to happen before starting sales, as the registration incurs costs.
Only when revenues in these states exceed a critical threshold does it make sense to request a tax ID. In that case, there will be a recalculation by the authorities, for which businesses should have set aside a portion of their revenue in advance. Therefore, sellers should not wait too long to register, even though there is no specific revenue size established.
Whether a tax ID is necessary is not solely dependent on revenue but also on the location of the goods. Similar to PAN-EU shipping, sales tax is incurred where the threshold of inventory is exceeded. Since Amazon distributes inventory across various FBA centers in different states, sales tax may also be applicable there.
Another problem arises with the question of how to track the tax liability in the various states when Amazon itself does not provide the data. At this point, Till recommends the tool TaxJar. It helps the seller track whether and where they have exceeded the threshold and what the final tax liability is. This way, the seller can react early, set aside the necessary reserves, and apply for the sales tax license in a timely manner.
Those who want to be on the safe side can hire an American tax advisor instead of using TaxJar. While this incurs additional costs, a tax evasion case would ultimately be much more expensive.
UG, GmbH, or an American Corporation Inc.?
Contrary to popular belief, it is not necessary to establish an American company for expansion. Theoretically, it is also possible to sell on Amazon in the USA as a UG or GmbH. However, there is always a residual risk regarding product liability in the USA, even with the simplest and safest products. The question is: Do I want my German main business to be liable for the risks of the presumably much smaller US branch?
However, in addition to establishing an American company, there are many other options. A good product liability insurance can be an alternative, as can the establishment of a German UG, which then allows sellers to sell in the USA, for example, with Amazon FBA. The advantage: With a German company, there is a maximum sales tax liability; with an American company, on the other hand, an income tax liability and high administrative effort are automatically triggered.
However, this question does not need to be definitively answered for the start overseas. Unlike converting a German seller account to a different corporate structure, this endeavor with a US account is much simpler and typically requires only a few minutes of effort.
And what about the bank account?
It is often argued that establishing an American company is necessary because sellers cannot obtain an American business account without one, which is needed to sell on Amazon in the USA. This is true; however, German sellers do not actually need an American bank account. Amazon payouts can also be made to a German account. While there are currency conversion fees of 4%, these are manageable in the startup phase compared to the financial burden of incorporation, which can cost several thousand euros.
An alternative can also be payment service providers that offer their customers an American account number. This reduces the currency conversion fees to about 1%. In Seller Central, the payment method can be changed at any time.
Product Liability and Compliance
One rumor is true: Sellers who sell on Amazon in the USA must thoroughly familiarize themselves with the legal regulations of the product category and the issue of product liability in advance. This is because American law indeed makes it much easier to sue companies for product risks.
Helpful measures can include warning labels on the product packaging or the product itself. Laboratory tests may also be necessary. For this, it is advisable to collaborate with appropriately specialized partners in the USA, as they know exactly which rules apply to which products and where sellers need to make adjustments.
Conclusion: Hurdles? Yes, but none that are insurmountable.
The reluctance of many German sellers to sell on Amazon USA is significant, but ultimately unfounded. It is no surprise that there are some hurdles to overcome, as this is an internationalization of the Amazon business. However, this is relatively manageable compared to other industries, especially when sellers use Amazon FBA.
Nevertheless, it is important to adequately prepare for this step. In particular, research regarding the requirements for product liability and compliance should not be taken lightly. Consideration should be given to collaborating with an American partner.
For those who want to get more in-depth information or seek advice, you can do so at The Tide is Turning. Additionally, we have embedded the complete YouTube webinar for you.
Image credits in the order of the images: © Mariusz Blach – stock.adobe.com / © WindyNight – stock.adobe.com / © my_stock – stock.adobe.com / © Pixel-Shot – stock.adobe.com
