How can sellers sell on Amazon in the USA? A short guide
Revenue of Amazon in Germany 2019: 22.23 billion US dollars. Revenue of Amazon in North America 2019: 170.77 billion US dollars.
These figures illustrate what everyone already knows: The revenue potential on Amazon.de is already large – in contrast to the potential on Amazon.com, it is almost ridiculously small. It is no surprise that many German sellers also want to expand their business to the homeland 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 have to invest the same amount of money, establish an American company, and ideally gather an army of US-experienced lawyers behind them to be able to sell on Amazon in the USA?
We watched the popular YouTube webinar from quantified markets with Till Andernach, the expert on expansion to Amazon.com, and 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: The USA is the largest market economy in the world with a huge e-commerce sector. And Amazon currently holds about 50% of this e-commerce. This also hides a very large potential for German companies on Amazon USA: When sellers sell on Amazon.com, they have access to an Amazon marketplace that is twice as large as all other Amazon marketplaces combined.
For Till Andernach, however, another component comes into play: 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 equivalent to a disaster. Many sellers therefore want to establish a second pillar for their business.
And this can even be done without the need to explore new platforms. No Amazon seller has 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 one or two hurdles that need to be overcome. Overall, however, it is easier to sell on Amazon in North America than most believe. In principle, 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 company 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 play a role for sellers who want to sell on Amazon in the USA.
Creating offers
Creating offers is essentially not much different than in Europe. As with PAN-EU sales, one 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 particularity is also the goods handling. First of all, the goods must be imported into the United States. Uncertainty can arise here regarding the naming of the exporter and importer of record. Ultimately, the dealer who brings the goods to 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 even lead to confusion among established international freight forwarders, as Till makes clear in an example during 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 thoughts are probably about sales tax for Amazon sellers. Similar to the European Union, merchants are only liable for tax in the states where they have goods stored. The good thing is: Amazon is already taking care of the remittance of sales tax in many states today. In these states, sellers do not have to worry about anything further.
Differently in states that do not appear on this list. Here, merchants 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 the start of sales, as the registration costs money.
Only when the sales 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 authority, for which companies should have set aside a portion of the revenue in advance. Therefore, merchants should not wait too long with the registration, even if there is no fixed sales amount.
Whether a tax ID is necessary, however, does not depend solely 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 the inventory to various FBA centers in different states, sales tax may also be incurred there.
Another problem arises with the question of how the tax liability in the various states can even be tracked 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 how high the tax liability ultimately is. This way, the merchant can react early, build 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 consultancy instead of using TaxJar. While this incurs additional costs, a procedure for tax evasion will ultimately be significantly more expensive.
UG, GmbH or an American Corporation Inc.?
Contrary to rumors, 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, the downside is that there is always a residual risk regarding product liability in the USA, even with the simplest and safest product. The question is: Do I, as a merchant, want my German main business to be liable for the risks of the presumably much smaller US branch?
However, besides establishing an American company, there are many other options. A good product liability insurance can be an alternative, as well as founding a German UG, with which merchants can then 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 a high administrative burden are automatically triggered.
However, this question does not need to be answered definitively for the start overseas. Unlike converting a German seller account to another corporate form, this endeavor is much simpler with a US account and usually only requires a few minutes of effort.
And the thing with the bank account?
As an argument for establishing an American company, it is often stated that merchants cannot obtain an American business account without one, which they need to sell on Amazon in the USA. This is also true – however, German sellers do not actually need an American bank account. The disbursement from Amazon can also be made to a German account. While there are exchange fees of 4%, these are bearable in the startup phase compared to the financial cost of incorporation of several thousand euros.
An alternative can also be payment service providers that offer their customers an American account number. Then the exchange fees drop to about 1%. In Seller Central, the payment method can be changed at any time.
Product liability and compliance
One rumor at least is true: Merchants selling with Amazon in the USA must thoroughly familiarize themselves with the legal regulations of the product category and the issue of product liability in advance. Because, in fact, American law makes it much easier to sue companies due to product risks.
Helpful can be, for example, warning labels on the product packaging or the product itself. Laboratory tests may also become necessary. For this, it is advisable to work with appropriately specialized partners in the USA, as they know exactly which rules apply to which product and at which points merchants need to make adjustments.
Conclusion: Obstacles? Yes, but none insurmountable
The reluctance of many German merchants to sell on Amazon USA is significant, but ultimately unfounded. That there are some hurdles to overcome is no surprise, after all, it 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 prepare this step appropriately. In particular, research regarding the requirements for product liability and compliance should not be taken lightly. Here, consideration should be given to collaborating with an American partner.
For those who want to get more in-depth information or seek advice, they can do so, for example, 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
