AMAZON PAN - Should You Activate It?


As of May 2018, Amazon operates more than 30 fulfillment centers across Europe. With that they can provide an excellent delivery experience for your customers. If you are an Amazon FBA merchant in Europe, FBA offers three international fulfillment programs: PAN-European FBA, European Fulfillment Network (EFN), and Multi-Country Inventory (MCI). All options have pros and cons. We advice to think about all options carefully before you start shipping.


1. PAN-EUROPEAN FBA (PAN)

PAN-European FBA enables you to sell across Europe by helping you place your inventory closer to your European customers. Opting for this model means you must allow Amazon to store your goods in and fulfill orders from their seven main distribution centers (currently in UK, Germany, Spain, France, Italy, Poland & Czech Republic).

Benefits:

  • (slightly) quicker delivery times to customers
  • (slightly) lower fulfillment fees: With Pan-European FBA, when a product is sold in one Amazon European marketplace, you will only pay the local fulfillment fee from that marketplace.
  • (potentially) better SEO rankings (however, not proven).
  • All products Prime eligible
  • All products visible to millions of customers across Amazon’s European marketplaces

However, using Pan-European FBA immediately makes you obligated to be registered for VAT in all 7 countries!


2. MULTI-COUNTRY INVENTORY (MCI)

The MCI option is a hybrid method of PAN and EFN and an alternative to the PAN-European option. Here, you choose the countries into which you ship and store your inventory. Usually you chose two countries up to six countries. You can fulfill orders from any of Amazon's European marketplaces. In this scenario, you are only obligated to register in the countries where YOU decide to store your inventory.

Benefits:

  • (slightly) quicker delivery times to (some) customers
  • Only VAT register in those countries where YOU choose your inventory to be stored
  • Less paperwork when getting started (compared to PAN)
  • All products Prime eligible
  • All products visible to millions of customers across Amazon’s European marketplaces

You save on some VAT compliance costs, but you still pay local fulfillment fees when selling in the marketplaces for which you store your inventory locally, and cross-border fees when selling on other Amazon European marketplaces.


3. EUROPEAN FULFILLMENT NETWORK ("EFN")

The EFN is the simplest of the three options. You only store your products in one of Amazon's warehouses (for most sellers we recommend the UK), and ALL orders are fulfilled from that country. In most cases, this has NO IMPACT whatsoever on the customer experience (as delivery times are only slightly longer). In terms of VAT compliance, you will only need a VAT registration in the country where the goods are shipped from. Having said that, if your sales to customers around the EU increases, you will also need to keep an eye on the distance selling thresholds. If the net sales (excluding VAT) to customers in other EU countries breaches the states' threshold (for example Germany, France this is €100,000), you will then also need to VAT register in that country. What are the "distance selling rules"? You have to charge local VAT until the VAT sales threshold is exceeded in any other EU member country where your goods are sold per calendar year. Find out more on the official UK government website.

Benefits

  • Only VAT register in one country
  • Less paperwork when getting started (compared to PAN)
  • All products Prime eligible
  • All products visible to millions of customers across Amazon’s European marketplaces.



BOTTOM LINE

If you are a "small" Amazon seller, do NOT enable PAN. Amazon does a good job at selling the positive parts of the program (Amazon PAN). However, Amazon does a terrible job at telling you the negative parts. In short, PAN doesn't make sense unless you make a lot of additional business in theses countries which would offset the additional cost for VAT filing, consulting, etc. Our strong recommendation: Leave all your goods in one warehouse (for example in the UK) and use BIL (Build-International-Listings). "Inventory" -> "Sell globally" -> (BIL) Build international Listing. It's hassle-free, there are no additional cost, and you have zero headaches. Anyone trying to tell you something different should provide you with solid and sound business case. Unless the European Union harmonizes their VAT system, Amazon PAN-EURO is an overkill for the average seller.

Do you have any thoughts on this issue? Feel free to leave a comment below! Likewise, if you need support with getting your business VAT registered in the UK we can also help out and point you in the right direction.

 


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