Biggest Mistakes Amazon Sellers Make Expanding Globally and How to Avoid Them - MerchantSpring

Avoid these big mistakes that Amazon sellers make! Taking the Amazon Marketplace business that you’ve built to the next level by bringing your products to new, international marketplaces can be an exciting and rewarding endeavor. However, there are a lot of things to learn and consider before you take the leap to a new Amazon marketplace. If you don’t do your research ahead of time, you could end up racking up unnecessary expenses. This article will walk you through some of the biggest mistakes Amazon sellers make when they first start operating globally, and how you can avoid them.

1. Assuming International MetricsWill Match Domestic Metrics

Amazon marketplaces can cover multiple countries, each with their own consumer trends, cultural norms, and market potential (both in the number of potential consumers and their average spend). Even if you have gotten your sales projections down to a science in your domestic Amazon marketplace, you can’t assume that they’ll hold true for international marketplaces. You’ll need to do your research before sending your product(s) to anew FBA warehouse in a foreign county. You want to avoid running out of stock and damaging your listing’s potential , but you also don’t want to order too much stock and end up wasting money on unsold units.

Make this a bit easier on yourself by simplifying your offerings early on. Focus on one product and one new marketplace. You’re already familiar with how to track metrics related to your sales for future projections (and if you aren’t, you should be working on that immediately). You simply need to populate your model with new data, which you can get by having a few international listings and sales under your belt. Once you’re familiar with the process of selling in a foreign Amazon marketplace, it will feel much easier to grow into other marketplaces, and you will have more accurate projections before ordering or shipping products.

2. Treating Marketplaces As Countries

It’s important to know that each Amazon marketplace can service multiple countries, particularly outside of North America. Not doing so can be a big mistake. For example, Amazon.de (the Dutch Amazon Marketplace) services Germany, Austria, Belgium, Luxembourg, the Netherlands, and sometimes other countries within the EU. While these cultures may share similarities, they belong to different countries with differing consumer habits that you will need to understand if you want your products to perform well. For an overview of the “Big 5” Amazon marketplaces in the European Union, you can read more here.

One of the best investments you can make when you start doing business overseas is to find a partner or service provider that can localize your listings. You will find many automated tools, some directly on Amazon’s site, but if you’ve ever seen a listing that’s been translated to your first language by a tool instead of a native speaker, you know just how unprofessional and awkward it can seem. A native speaker who can localize your listing can do more than just translate it. They can ensure that your listing’s tone and message come across as you’d originally intended.

Between cultural considerations, listing translations, and new business practices, there can be a lot of research to do. Make sure you understand what exactly you’re undertaking before making an investment in international Amazon marketplaces. A basic list to review for any given country includes:

• Industry/consumer trends and predictions for the foreign country
• Traditions and cultural norms that might impact how consumers view your listings
• Legal requirements and regulations including business operations, taxes or VAT, and shipping/customs requirements
• Competition and production landscape, service providers, suppliers, shippers, and competitors that can affect your international sales and listings
• Marketing channels including popular social media in the new country you will be selling in and potentially a site easily accessible (and again, localized) by your new potential consumers

3. Not Treating Expansion as Investment

Just like your first venture into Amazon selling, tackling a new Amazon marketplace is going to take time. You will certainly be equipped with a lot more knowledge and experience, but product rankings, listings, projections, and marketing still take time to get off of the ground. Additionally, if you started your Amazon selling locally, you would’ve started with some familiarity of consumer trends, competitive landscape, and laws or regulations required to operate a business. In a new country, you won’t have that advantage without some serious research. You need to look at your first couple of global launches as a business expense and a learning experience. You may earn some money on your first attempt which is great, but don’t be discouraged if you don’t because revenue will come as your business grows.

With so many new variables for consumer preferences, taxes/VAT, customs, and more, it’s very likely that you’ll have some unforeseen expenses, even if you did a good amount of research. Avoid going all in on a global expansion if a poor result will be detrimental to your domestic business. Hedge your bets by ordering a conservative amount of units and avoiding unforeseen expenses . Additionally, make sure to seek counsel from business experts and services that can guide you through the process of going global. Foreign business service providers such as PingPong can help you set up bank accounts, prepare for foreign currency conversion and VAT, and give you feedback on how to prepare for an international venture. Global expansion can be extremely rewarding, but it is not a quick buck. Don’t make the big mistake of assuming it will be.

4. Converting Money Too Frequently

You likely know the importance of investing back into your business and preparing for business taxes. In order to do that in a foreign marketplace, you’ll likely need to exchange currencies regularly. Foreign currency exchange is not straightforward. They involve an additional layer of complexity, timing. 

It can be tempting to sit back and let Amazon automatically convert your international marketplace sales revenue back into your local currency, but here are a few things to think about before you do:

1. Currency conversion rates and fees – How much is Amazon (or your bank) charging you to convert from one currency to another, and are they getting you the best rate? Services that seem convenient and built-in are likely not working hard to get you the best rates—they’re already offering you convenience. Look for a service that offers both.
   
2. Double conversion fees – Due to the fees associated with converting from one currency to another, you’ll want to do it as little as possible. Converting from a foreign currency to your local currency, and then having to convert back later to pay something like VAT is known as double conversion, and it unnecessarily loses you money.  Before you move money, think about upcoming expenses that can be handled in the foreign currency. You will need to pay foreign VAT for the countries you are selling in, you might have marketing fees that should be handled in a foreign currency, and you should investigate if you can pay any of your suppliers or service providers in the foreign currency.

3. Investing in your business – Just like your first Amazon business, it’s important to invest back into the business as you earn revenue to continue seeing growth. Think about how much of that can be done (products, services, etc) in the foreign currency you are collecting and don’t move currency back to your personal account.

5. Expanding Your Amazon Business Too Early

A successful global expansion effort is going to take time, energy, and money. It can be tempting to want to branch out early in your Amazon selling career. However, don’t give into this temptation it can result in a pretty big business mistake. You’ll want to adhere pretty closely to the “80/20” principle when it comes to a major undertaking such as selling in a new Amazon marketplace. The principle states that you can generally get ~80% of your overall revenue from ~20% of the effort you put in. That last 20% of potential revenue can be the most difficult to reach, and it’s at this point that you should start looking at additional revenue channels for your product(s). If you aren’t earning at least 80% of your projected annual sales yet, you run the risk of hurting your domestic business by expanding too soon. Some things to consider include:

1. Do you have time to devote to an expansion effort while still doing everything for your domestic business? At first, starting an international Amazon business can require just as much time and effort as your original business required. You want to ensure that spending time on expansion efforts won’t hurt your primary business.
   
2. Have you streamlined your day-to-day business operations? This is similar to point #1, but it’s important for anyone looking to scale. Broadly, as your business grows, there are 5 things you should try to stop doing yourself so that you can scale more and more:
   
   • Admin – Things like data entry, record keeping, and commonly repeated tasks (especially if you can document how to do them) should be removed from your plate first. These are often easy to hire for and don’t require specificialized skills to complete.
     
   • Production – Once you have the management of suppliers and production down (again, documentation is key), pass it on to an employee. Finding and negotiating with a supplier may require your expertise, but repeat orders for existing products shouldn’t.
     
   • Marketing – Social media, content creation, and basic product pre-purchase questions should be handled next. You’ll likely want someone experienced in this or a service provider who manages it professionally.As you scale marketing, it should take up less of your time.
     
   • Business Development – Market research, product development/research, and supplier contact building are all things that a skilled partner or service provider can handle. It should be one of the last things you hand off, and it’ll add valuable time back to your day.
     
   • General Management – This is when you find someone to handle all day-to-day operations and oversight for the business on your behalf. This role manages all of the people filling the roles listed above. Most business owners may never reach a point where they want or need someone else to do this, but it’s considered the final step to streamlined business processes.

You don’t need to have all five of the above business functions automated or streamlined to look at global expansion. Having the first one to two stages (Admin and Production management) handled by someone else or matured to the point that you can do it quickly will be key to enabling your international expansion.

Finally, similar to the time and effort mentioned above, you’ll want to ensure your business has the cash flow to support an expansion effort. You’ll still need to pay suppliers and order stock for your domestic business on a regular basis. Make sure that you have enough money to invest in international Amazon selling without hindering the sales and product availability of your business.

6. Not Having A Proper Growth Plan

Lastly, it’s important to have a plan in place so that you fully understand what you’ll need to do to expand your Amazon business to new marketplaces. If you feel like you’re prepared, you shouldn’t hesitate to grow. However, that doesn’t mean you should dive in without a general process and expected outcomes. 

Do additional research on the rules, regulations, and costs to expanding to certain countries. Spend some time understanding the cultural and consumer trends for products you are seeking to expand. Seek expert advice or assistance in building both your business and your listings for new marketplaces, and be sure to listen to the advice that you get. You’ve likely lived in your local marketplace’s region for years, maybe your whole life, but that may not be true for new international marketplaces and that lack of cultural knowledge can slow you down.

If you’re researching and feel like you may not be ready, then you can still make good use of your time by preparing now for future expansion. Start thinking about or seeking out ways you can streamline business processes. Begin monitoring current sales metrics and trends to better understand how to manage international data as well. Start to think about countries you may want to expand to and do some research on local culture in your free time. If you’re comparing manufacturers and shipping companies and the two seem practically equal, choose the one that might make global expansion easier later.

Finally, remember as you build a plan for expansion to have actionable items on which you can execute. No plan will be efficient if in reality it contains pages of research that you aren’t sure how to utilize yourself.

Summary:

Make sure that both you and your business are ready before you look at expanding to international Amazon marketplaces. Expansion can bring a lot of additional revenue channels to your business, and it can be very rewarding. But expansion will also take a lot of time, effort, and money to do the right way. When you’re ready, make sure to do your research, have a plan, and seek out the advice of experts in the foreign country where you plan to sell.

PingPong can be your key partner when you are ready to expand into international Amazon marketplaces. Providing significantly lower foreign currency exchange rates, PingPong can help you save money when you set up your global business and file VAT. Check out www.pingpongpayments.com for more information and to set up your free international account in just one day. PingPong can help you continue #movingforward!