Tariffs and Takeoff: Why Europe Is the Smart Hedge for U.S. Brands

Paul Sonneveld
I'm your host, Paul Sonneveld, and today we're tackling a big strategic question for US Amazon brands. Is Europe still a nice-to-have, or has it become a must-have, particularly in the context of all the tariff announcements that we've seen over the last six months or so? 

Now, before we jump into today's session, I do have two quick announcements. The first one is to do with our Amazon Vendor Summit. Our Amazon Vendor Summit is coming up on the ninth and tenth of December. It's a two-day virtual event featuring over fifteen speakers and a thousand attendees. Early bird registration is now open. Just scan the QR code on your screen to grab that free ticket. It's complimentary for all vendors and MerchantSpring clients. So make sure you don't miss out. 

Secondly, a quick announcement about Amazon Unboxed. Luke and I will be heading to Nashville in early November, and we'd love to connect with as many of you as possible while we're out there. So if you're attending, just drop me a quick message on LinkedIn. I'd love to catch up in person. 

So let's move on to today's topic. Today, I am joined by Marc Miller and Jake Russell from Mercātus, one of the largest UK Amazon agencies. With US tariffs tightening margins and Europe's Amazon network maturing quickly, there has never been a better time to talk about what expansion across the Atlantic really looks like. This is a live session, so as per usual, please jump into the LinkedIn comment section or the YouTube comments throughout the session, and I'll make sure we'll get to your questions and put them in front of Marc and Jake. Without further ado, Marc and Jake, welcome to the show today. 

Jake Russell
Hi Paul, thanks for having us. 

Paul Sonneveld
All right, let's jump straight in. Let's talk about, let's start with tariffs. That's probably what everyone's thinking. Maybe we'll start with you, Jake. Tell us, why are tariffs acting as such a strong forcing function for Amazon brands right now? 

Jake Russell
Yeah, so this is the hot topic of the moment, as you say. So, for us the um the conversation we're having with us brands is is just around uncertainty so you know uncertainty about what the future is going to look like from a tariff perspective and how that is going to impact your P&L. So, it's seemingly things are changing every couple of days at the moment if you you know you tune into the news at the weekend trump was announcing new retaliatory tariffs against china because of these rare export, raw mineral export controls that they'd put in place. So it's making it very difficult, obviously, for brands to plan ahead. 

These additional rates are already stacking on top of tariffs that are already in place. So it's kind of putting things into a position where It's effectively wiping out people's Amazon margin. Margins are not amazing on Amazon in a lot of contexts anyway. So having the pressure of additional tariffs put on top of that is going to kill things. So you don't have to go into a super detailed explanation of the tariffs to understand that. If you already had a thirty percent rate, there's talk of a hundred percent rate going on top of that from November the first. If you've got a ten-dollar landed cost, you've got thirteen dollars worth of tariff before you even do anything else. 

So, it's it's a problem for brands, but when you look at the EU, you know a lot of the HS codes for popular Amazon products that are coming into the EU are at nor or say six percent. And with Amazon's AGL, Amazon Global Logistics Network, now, it means it's really easy to actually just completely circumvent your home territory and bring stuff straight from China or wherever you're producing into Europe. So it's not just a sort of new opportunity in terms of market reach. It's a chance to potentially just have a bit more certainty around actually what your margin is going to look like. 

Paul Sonneveld
Yeah, I was actually going to talk a little bit more about logistics. I meant to mention it in my intro. And I was going to ask you, Mark, you know, Amazon has made, and US brands may not be aware of this, right? But Amazon has made big investments in its logistics infrastructure in Europe, making it much easier. What are some of the big changes in terms of Amazon's infrastructure evolution that you've seen in Europe and that US brands should be aware of?

Marc Miller
Yeah, I think you're right. You know, certainly over the last few years and it's not massively utilised in Europe at the moment. But their advancements mean that they're now connecting those Asian manufacturing hubs directly into Amazon's network in a seamless interface on the seller side. More to the point, you don't have to be shipping huge quantities, as one might initially think. You can now ship less than container loads, so small parcel shipments, into Europe as well. 

So, obviously, with those advancements plus the fact that the network has become more connected. There's more marketplaces that have come on board across Europe in the past five years. They've got denser fulfilment-centred coverage that combined makes it very, very accessible and relatively seamless. I don't want to use the word easy ever, but relatively seamless sort of door-to-door solution for a brand situated in the US, manufacturing their product in Asia. 

There is a route into that market, coupled with the fact that you know now it was announced, I think a few days ago. So, the latest European territory to come on board was Ireland. Earlier this year, Belgium proceeded that a couple of years ago, but they've just announced a billion-dollar investment into Belgium, which will further, you know, densify that capacity and accelerate local delivery throughout that network and to each of those locales. So, yeah, it seems like a sure bet. Certainly, Amazon are putting a lot of effort into facilitating this. And coupled with how this conversation started, you know, Europe is a huge market, four hundred and fifty million consumers. You know, it's in its growth phase and Amazon are investing heavily to continue to deepen that network and, you know, provide solutions for the consumer. 

Paul Sonneveld
So, that sounds like Amazon is like they really have taken that sort of you know, the excuse around the logistics network, or it's been too hard to get products over there. They've really invested heavily to take that barrier away. But I was gonna ask you, Jake, what are the other seen or and what biggest sort of, what misconceptions or barriers do you still encounter from US brands as you're talking to them about expanding into Europe? I mean, what are the other obstacles that tend to come in the way? Are there real obstacles or perceived obstacles? 

Jake Russell
So there's definitely a lot of perceived obstacles, but I don't think they really stack up when you look at them. So the one that always jumps out to me is that the US sellers think Europe is too small to matter, which, as Marc just mentioned, there's four hundred fifty million consumers here. It's a massive market, and there's a lot of interesting category asymmetries that exist relative to the US that actually, potentially, if you do your research, might make it a lot more interesting than you actually think. 

So, because of country-level nuances, particular product categories are really big here. So, pets, if you look at France and Germany, is really huge. So we were looking last week as a sort of interesting point. The sixth most searched term on Amazon France was a term for a cat scratch pole sort of thing. Now, you know, like it's huge, there's thirty percent of people in France own cats. So, when you look at these like little nuances like this that as a whole network on the sort of macro level it's a big market, but actually when you break down into the categories some of these categories can be really huge relative to the to the us because um because of just the cultural differences. 

Another one like France and Spain, there's a big like stationary culture there, they the like you know it's something like top five most searched things around this time of year is like a physical calendar planners for writing on paper because they plan on paper. So, it's like things like that were maybe people may write it off as a not particularly big opportunity for them. It's worth going to do the research to see actually what is the volume in my catch because they may be surprised. Other things I think then is like, in that vein is treating it as one marketplace. So, thinking that Europe is Europe, we're going to do the same thing everywhere. But it's not the case. So like I say, these are very different countries with very different cultural norms who shop in slightly different ways, want to buy different things at different times of the year. So you have to be going in and looking at country-specific research. 

So doing your country-specific keyword research, obviously, because it know different language in every one of those. But like looking at like local seasonality planning looking at what particular holidays like as i mentioned like this sort of back to school periods and things like that but like really understanding each of the marketplaces and having a strategy for each one of those yeah and then included in that like it's just an important point that we make is The UK is not part of that anymore as well. So obviously, we've spent ten plus years or something like that arguing about Brexit. So we're no longer part of the EU, unfortunately. But a lot of US brands sometimes think that we still got that connection. But sadly, sadly not. So yeah, I think that's one of them. The other thing, again, just to go back to Mark's point, is thinking about it has to be a big operational headache. You need a free PL here. You need boots on the ground, et cetera. But to the point that Marc just made, the system that are in place now, Pan-EU AGL, you don't need that. You can have Amazon sort of burden a lot of that.

Paul Sonneveld
Yeah, I was actually going to ask Marc a little bit more about that because I think there used to be a perception when the UK was still part of, you know, pre-Brexit, you know, everything was easier. You put your inventory in the UK, you know, you sort the rest of Europe. But practically speaking, you know, again, let's take a US Amazon brands perspective. How does the Pan-EU FBA network work in practice? So, with the Brexit now, and you know yeah. 

Marc Miller
It certainly was easier when the UK was part of Pan-EU. We've all suffered because of that. Certainly, UK sellers, but you know, effectively, you're talking about one large network across many countries. The way that Pan-EU works, it facilitates the inbounding of products shipment into one locale. The stock will be stored initially in that fulfillment centre of choice. And once your product is enrolled into the program and will get on to the requirements for enrollment, Amazon will automatically place your stock across that network in all their fulfillment centres based on where those orders are happening and where they're seeing demand signals for your product. 

So the consumers sort of see a local delivery and get that local delivery promise. You as the seller, benefit from the local FBA rates if you're in Spain, France, Italy, Germany, Sweden, et cetera where the unit ships from. So, yeah, it's treated as one stock pool obviously, as your progress matures, there's conversations with regards to inboundings specific stock specific skews into specific markets to maybe meet expected or forecasted demand based on some of those cultural nuances and differences across the board. But yeah, Pan-EU is a great thing because you're not managing multiple stock holdings. 

Paul Sonneveld
That sounds, and I know Amazon, again, to your point earlier about there's been a lot of investments that have been made there. And certainly, I very rarely come across kind of, you know, well, compared to what I used to hear anyway, that, you know, the challenges of moving stock and all of that. So Amazon's really lifted the game there. But having said that, just to play a little bit of devil's advocate here, right? 

Marc Miller
Absolutely.

Paul Sonneveld
There are still some, you know, local specific challenges that remain, right? Like compliance, customs challenges, you know, Jake, how do you navigate through those? What are the key ones, and how do you navigate through those? 

Jake Russell
Yeah, so there's a few key things that you've got, plan for and get it set in place. The first one's that. So Amazon and you know different tax partners and the EU legislation have made it a lot easier to manage your VAT. But you do need to be VAT-registered in each individual country that you're going to store stock. So, for Pan-EU, that can be up to seven countries, I think. Now, where they stole the stock, maybe even more than that now. So you need to have that registrations there. So that's the first one. 

Again, all of this is facilitated by really strong partners. We work with really strong partners. Amazon provide a lot of really strong partners who can help do this. So they can manage the VAT applications for you and the VAT filing. So it's just the case of paying a fee and it's done. And a lot of the time, Amazon will co-fund some of these processes to get people on board. So that's the VAT thing. Customs-wise, you need an EORI number, which is just effectively an ID number that businesses require for bringing stock into Europe. So that's something you have to apply for. That one's super easy, so you don't need really need anyone to help with that but it's just something that needs to be done. 

The note on that is both those things again, EU, UK separately, so that's just something to sort of watch out for with that. But then, beyond that, there are some there are compliance requirements across Europe that I think these are the things that put people off a little bit, and people consider them like particularly compared to the US. That there's a lot of like compliance overreach now. The reality of it is, it's not that hard to deal with. So there's two in particular that you have to work for, for anyone coming within the EU. So there's one called GPSR. So it's about product safety regulation. So it's just about having an EU responsible person for that product and for the entirety of its life line. And then some requirements around traceability, supply chain traceability and things like that. Again, it's not very hard to do. Partners can help you report the information that you've got in there. There's portals to submit all this stuff. And it's just about them having somebody who can provide this information and can act on half of the brand if ever there is something like a recall, et cetera. 

And then the other one sort of in that vein, is called EPI. So EPI is EU policy around end-of-life management for products. So like, packaging or if it's electronic waste, the batteries and things like that. So what you have to do is report on the amount of waste you're putting into the market and what you can do with that, and pay a sort of small levy to help deal with that problem. Again, super simple, really. There's providers who do this you can set up on a portal once a year, you go in and you report the number of units you've sold into that market, how much waste that is potentially created and then they report that to european authorities um yeah it's sort of on the face of things like more so i believe than you know what is in the US but it's nothing that can't really be overcome all these systems link back into amazon so you set up with these providers they provide the information back into amazon i'll be using the right one they they certainly do um to ensure that you're sort of completely um compliant and above the board though so Yeah, you're right, Paul. There are some things that still need to be dealt with, but that's the benefit of working with your agencies and then using strong partners within that territory to try and take that headache away from you. 

Paul Sonneveld
Yeah, I was going to ask that exact follow-up question there, Jake, around of those things that need to be done, compliance, end of life, I've got my whole list here written down, EORI, what can I expect from say a full-service amazon agency versus where do i need to bring in specialised partners? 

Jake Russell
Yeah, so that certainly, bringing in a good like tax authority accountants who can help deal with the filings for you is key. As an agency, we're here to advise on all of these pieces. We have the right partners in place who we know work well with Amazon. We know which partners to use to get rebates from Amazon for the costs on this sort of stuff. So it's more about we know which ones are going to work best because we've tried a lot of them in getting people signed up, and which ones you can use to geta  rebate from Amazon, et cetera. But, yeah, the agency, you're not going to be responsible for the actual, any of this compliance stuff, but we know the people who can help and the ones who are going to work best with Amazon as well. 

Paul Sonneveld
That makes sense. Um, you haven't touched about advertising yet, and I'd love to just dig a bit deeper into that piece because obviously we spoke a little bit about fulfillment, spoken about local, you know, differences, even doing key through keyword research. The highlighter for me is still thirty percent pet ownership in France. That's the stat that will ever live with me. Or cat ownership, I should say. I've just got visions of French people living in Parisian apartments with scratching poles for some reason. 

Jake Russell
Yeah. Apparently, that's what it is. They're quite ornate. They're almost like full apartments for the cats and stuff like that. 

Paul Sonneveld
Nice, nice. But what about advertising? I'm interested specifically in two questions. One, efficiency and return versus you know money spent in other Amazon markets, particularly the US and then secondly, any differences between markets beyond obviously the language and the keywords you might be building, is there any differences in approach or anything interesting worth considering? 

Jake Russell
Yeah, so just as a general and again, it depends on which category, Paul. But the US is really mature, it's really competitive you know they have some amazing operators over there they have amazing agencies like everybody's really been in the game a long time they've refined the advertising. In Europe, some of these territories are still somewhat for the green like even some of the smaller territories like you know so we talk about Belgium, Netherlands etc, they're just coming online from an advertising perspective. So as soon as that gap opens, the competition is not as fierce, and you know the techniques that people are using to get to the top are not as advanced. So there definitely is an advantage on European soil versus US if you can bring that European knowledge over and buy into the US system. 

In some categories, the CPCs is quite considerably cheaper. So we looked at one of our clients operating in the US top of search bids are at least two dollars plus. In France, for argument's sake, it's like it's about the dollar. So you've got that bit more room to be aggressive, to go off the rank if you want to come launch here. Now, again, it's not every single category, but it does tend to ring true in a lot of places. UK and Germany tend to be a bit more competitive so quite comparable to the US. But some of the smaller territories were you can actually make a quite a good difference on there. 

And then in terms of like nuances from throughout each country, it's the interesting point is in some cases it can be a lot of like really good long tail because of the nature of the language. So in the categories where in the UK we may have quite concentrated in the top end of keywords that we're going after, meaning CPGs are super high because of the nature of the language, particularly German. The particular head words they use in putting the words together, the nuances in that, you get people in Switzerland and people from the Czech Republic and things like that who are searching in a similar sort of way, but on Amazon Germany. 

It means that in those cases, there's loads of long tail that you can go after. So it just means that there's a bit more spread if you've done your keyword research and actually like trying to go after the right terms, you've got a nice spread of terms to be attacking. That can help, particularly if you're in a super competitive category where the top end's expensive to break in. It does give you a few more options to move out. But yeah, the main thing is like for US brands, if you're coming over is not to just think it's like, as I said before, it's not one size fits all. You've got to be really looking in depth at each of these different territories to understand what's going on. 

Paul Sonneveld
That's such an interesting insight about the depth of the keywords and how people search, and the differences between someone like the UK and others. I thought people in Britain would be the most eloquent, but clearly, they're very efficient shoppers at the same time. So that's super interesting. I want to go back to some of the practical questions around inventory, right? So we've got this pan-EU model. You mentioned it before, Mark, but we've got to start somewhere, right? So if I'm a brand, and maybe I'm thinking like, probably not going to be shipping anything from the US. I'm going to ask my vector in China to probably ship it straight into the UK. How do you advise those brands on the inventory strategy? You know, where do they start? You know, where do they go next as they expand? You know, what does a good roadmap look like? 

Marc Miller
Well, I think obviously the first point, if we've got to that stage with you, we've obviously done an in-depth audit and we're looking where that potential volume exists and an idea of the size of the market. You know, that's the first point. And obviously, you know, despite having done this numerous times, you know, with any new client, we need to test how things work. Have we haven't worked with their factory before? How does their factory work? That whole piece to make sure everything's as smooth as possible so there's no issues. So, we would always err on the side of caution, maybe that's the Britishness in us. I'm not sure. But you know, there's no need to run before you can walk, to use an expression. 

But going back to the AGL a bit, remember we're talking about it's not just full container loads. LCL shipments as well. So small parcels. So obviously, you need to send in enough stock to give yourself enough coverage across that network on the pan-EU program. But you don't have to send in loads. So, you know, the message that we're putting across is start smart. Obviously, in the case where the client has completed all their VAT filings and everything, they're ready to have their stock distributed across the network. Start small, test, monitor the economics in each of those territories because, going back to the advertising, again, there are differences between CPCs, et cetera. So there will be differences in conversion. You might be having to refine your content to improve your conversion rate in Italy, let's say, whereas in Germany, that's really good. 

So you need to understand all of that. So the first period to be defined is, you know, very exploratory. A very cautious and slowly but surely hopefully, you know, proving the business case and building the volumes the rate of sales across the network to get into a position whereby we can start sending in full container loads. We can start thinking about there's a specific promotion in Spain or going back to those cultural nuances we're seeing, you know, we're selling cat scratches. We're always going to remember that now. Cat scratches in France and we want to send some stock in directly into France, let's say so it's really just you know thinking about it cautiously, making sure we're on top of the numbers and you know letting the data tell us you know where to go and what to do and you know prove the business case if you like. 

Paul Sonneveld
Yeah, certainly the days of sending in container loads because we are bullish about the sales are over. I do remember some, I think it was five or six years ago at Prosper meeting, some sellers that would fit that category. Very wise advice, Mark. Thanks for that. I want to get to maybe a question I've got. Thinking about but I've deliberately been holding off because I wanted to sort of hear about some of the other facets here but probably the only question that really counts at least in the mind of an Amazon brand owner in the US maybe I'm being a little bit unfair I apologise for those US friends who will be watching this on demand after but let's talk about profitability. Jake, I'd love it if you could share some examples of how Europe has delivered perhaps better margins for US clients. I mean, it's very hard. It's easy to drive sales in the US. It's really hard to drive dollars into the bank account, particularly on Amazon in the US. What's the story in Europe? 

Jake Russell
So there's a few examples. I mean, the obvious one that we touched on at the beginning is, you know, a lot of these depend on which category, and you're zero-rated coming into that. So we were speaking with a US client recently. They make some beauty products in China at the moment. That's twenty-seven percent with Trump's new tariff, that's hundred and twenty seven percent. The equivalent in Europe is zero-rated. So, off the bat, obviously, that's sort of the hot topic of this you've not got that problem. The other bit i think is quite interesting like again, there is again because of the different countries, and you know different shopping habits, there can be a bit of difference in pricing. And in some cases, it can be higher within Europe. So, we again, we were looking at a US client on the they were doing the supplement space, looking at vitamin C, so the best-selling vitamin C in US at the moment is probably about nine dollars. In Germany, for example, is about five percent higher. And that's even when you take into consideration, you know, we include Vat at source and whatnot here. 

So it depends on which category there is some potential sort of improvements from a price perspective that you can take. You know, if there's a way to premiumize your product and go into categories that make sense, there's some central wins there. The other interesting one I think we've had other people in the past come and we've discussed, is they, because if you're a US brand, you've not really dealt with your distribution right in the US, and you could have lots of gray market resellers on your list and they're like suppressing the price, pushing the buy box down. You've not managed that process right. It can be obviously a real headache in the US. 

But then, when those brands tend to come to Europe, they've not got those same issues, you know, the people in that the territories over here haven't got the stock available to them. So, they've kind of got an open market for them to rebase the price of where they actually want it to be and make the margin back. So, we've seen that happen before, you know it's particularly like in the toy category, it's quite interesting with US is just like a turned into a bit of a free-for-all all and then Europe was just a nice new new new place for them. 

So, when you sort of take into account about you know, there's a you know those few areas if you've got you know lower CPCs you're you're managing to charge potentially a little bit more dependent on where you are, you've got freedom in the buy box. There's also depending on countries as well there's some again there's nuances in return rates so sometimes that can save some people UK and Germany are generally like pretty similar to US, but France, Italy, Spain tend to be slightly less. So there's some improvements there. So, yeah, there's definitely some opportunity that, again, make it a bit more interesting for US brands. 

Paul Sonneveld
Yeah, certainly in the current context, you can really look at, you can almost look at the US P&L and you can look at different light items and go, right, that's going to be more favourable. That's going to be more favorable. That's going to be, you know, and you add it all up, it does float to the bottom line. Yeah. Great. We are over time. So I'm going to, I'm going to ask you last question here. And that is really like, I know a lot of US brands probably were tuning into this later. Cause, I'm looking at the time and they go, most of them are still sleeping right now, but for any of them, they're going to be watching this later on, you know, on demand and afterwards. And they want to really explore this topic with both of you. What is the best way of getting in touch with you, Jake and Mark? 

Jake Russell
I think it's always good to connect with us on LinkedIn. You know, we're always open for a chat with anyone. It doesn't have to be, you know, a hard sales conversation or anything like that. We just like to always like to meet Amazon sellers, brands, no matter how big or small they are, understand, you know, have a chat with people in the ecosystem. So, you know, drop us a connection request on LinkedIn, send us a message, and we're always up for talking. 

Paul Sonneveld
Excellent. Well, thank you so much, Mark. Jake, thank you so much for coming on, sharing your insights, being generous. Thank you for, I've written down various notes here in stats. Thank you for those very interesting ones. I must say, I'm not a cat owner, but maybe I should be. 

{all laughs}

Paul Sonneveld
I really appreciate it. All the best for Q4, and look forward to having you guys again. 

Marc Miller
Thanks, Paul.

Jake Russell
Thanks, Paul. 

Marc Miller
All the best to you. 

Paul Sonneveld
Take care. All right, everyone. That is a wrap of today's live session. If you join us live, thank you for being part of it. If you still have questions, feel free to reach out to us after the show. As Marc and Jake said, just drop them a message on LinkedIn, and I'm sure they'd love to follow up with you. If you have registered as well and you've managed to miss part of it, don't worry. We'll send you the full recording so you can visit the repeat takeouts anytime. 

Now, before I sign off, just a quick reminder that Luke and I will be at Unboxed in Nashville in early November. I think it's ten to the twelfth of November. So if you are heading to Nashville, please come and say hello. I'd love to catch up in person. And don't forget, Amazon Vendor Summit is happening on the ninth and the tenth of December. It's free for vendors and MerchantSpring clients and early bird registration is now open. So head to merchantspring.io, and go to upcoming events, and you'll find it right there. Stay tuned for more episodes where we continue to explore ideas and strategies that really help brands and agencies thrive on Amazon and beyond. Until next time, my name is Paul Sonneveld, and this has been Marketplace Masters. Take care.