How to Sell to the European Market [A Complete Guide]
Did you know that 28% of the global $1 trillion cross-border ecommerce market in 2022 is predicted to be from Europe? For most ecommerce sellers in the US, even a tiny piece of this $280B pie represents a transformational revenue and profit opportunity.
While the demand is substantial, it isn’t exactly simple to take advantage of it. But as Forbes has described, the key to success for ecommerce sellers in a post-pandemic world will be cross-border growth. It’s worth exploring what that means and whether your business is ready to explore international expansion. .
Some of the key challenges for US sellers looking to expand to Europe include:
- Deciding which products to sell
- Identifying & getting listed on the right marketplaces
- Managing inventory
- Finding appropriate shipping, warehousing, and logistics partners
- Managing multiple international ecommerce stores
It’s important to consider these questions before launching your cross-border initiative to avoid wasting time and money.
Let’s start with how to decide on what products to sell in Europe. To successfully sell in any market you need 1) demand for the product, 2) the ability to deliver the product to customers reliably, and 3) a market-appropriate pricing strategy.
In the case of cross-border ecommerce, net demand is a combination of 2 factors:
- Absolute demand
- Demand fulfilled by local players
To estimate absolute demand you can research products on Amazon or use any demand tracking tool like Junglescout. (Check out this post by Hubspot to get a comprehensive understanding of product demand).
Research can be a tedious process, but here are some suggestions to learn about your competition quickly and accurately:
1. Look for what is already selling in the market and why. Check for which products come up in your ads when you search for that product using a VPN to imitate the experience of a user based in the geographic market you’re targeting. Another method is to check for trends on Google.
2. Try to identify total sales in the category before launching a product, and estimate the number of sellers and SKUs are there. 2% of the sellers on average will drive most of the sales. Check the portion of sales in that category in that country and apply that percentage to the total GMV of that marketplace. For example:
- if 2% of all retail sales are driven by ‘leggings’ in Germany and Zalando’s total GMV in 2021 was $50B, the total leggings sales on Zalando could be estimated to be $1B.
- If there were 2,000 merchants selling leggings on Zalando, only 40 of them (2%) would theoretically be driving about 90% of the volume ($900M), meaning sales per brand would average out to approximately $22.5M annually.
This is an easy and yet effective way to approximate the sales in the absence of sufficient data. (The analysis given above is an example and not precise data)
3. Look for the most efficient marketing channels that your competitors are using in that market. Data on this can be found by going to Similarweb and checking the source traffic for a carefully selected group of competing webstores. This will not work on marketplaces as they would shield source data, but will work well on custom built or standard webstores built on platforms like Shopify. For example, if you find that 75% of the traffic is being driven by Google Ads, you likely will not want to start with organic marketing as your first step.
You’re looking for evidence that the products have strong demand in the target market, and that you can fulfill that demand profitably. Note that profitability isn’t just dependent on your COGS and gross margin. Cross-border sales can incur higher logistics costs, you may need warehousing in the new market, and you’ll need to estimate inventory turnover times to calculate carrying costs (which may be different than in your current market). Additionally, there may be international duties and customs fees to consider depending on your ASP and average order value.
Of course, just knowing the right products to sell will not ensure success. Other operational factors (from creating product listings to establishing a pricing strategy) will also determine your profit potential. To be successful you need to account for these localization challenges and develop a strategy to keep your operational and logistics costs as low as possible.
Cracking European Market is a Struggle
While there’s no doubt Europe is a market worth exploring due to its sheer size, non-European sellers have often struggled to expand ecommerce businesses there. Why?
- Multiple marketplaces: Unlike the US, where Amazon and Shopify dominate ecommerce, the European ecommerce space is fragmented. You’ll likely want to be present on multiple platforms to maximize growth.
- Data privacy regulations: Consumer privacy has become a contentious topic in Europe, and recent legal action has made ecommerce platforms cautious about collecting user data and leveraging it for marketing purposes.
- Supply chain issues in Europe: Many European nations are facing an acute labor shortage. This increases supply chain costs along with routine disruptions.
- Political Events: Events like Brexit have increased trade tariffs and VAT, making it even more difficult for foreign sellers to sell their products in Europe.
- Localization Challenges: Today there are 25 different currencies used across Europe. Multiple currencies require exchange rate management, pricing localization, etc. Outside of the eurozone it can be almost impossible to manage without a dedicated tool. Moreover, the EU has 24 official languages! Although you don’t have to translate into every language, you will likely need a translation and localization plan for at least 4-5 languages.
Considering these factors, you can expect your European expansion to be complex. The good news is that it’s not impossible, and with the right resources and a plan it’s actually pretty doable. So what are your options?
Expand to EU markets by using a full-service marketplace (e.g. Amazon) and staying within that ecosystem.
- Predictable, easy, fast. You know what you’re getting and how much it will cost.
- Easy to get started. You can be selling in days!
- You’re tied to one marketplace. No single marketplace in the EU has close to majority market share.
- You will be fully exposed to the risk of any unfavorable future policy or fee changes.
This option is best for smaller (under $1M annual revenue or so) brands looking for organic channels to accelerate growth rapidly in the near term. Brands exploring new markets before committing more resources to expansion may also consider this as a temporary option before committing to a larger-scale growth strategy.
Option 2 :
Build out your own solution. Identify the logistics providers you’ll need in each market for warehousing and fulfillment. Integrate their software with your systems and with the marketplace stores you create in each market.
- Endless flexibility. You can pick exactly what you need and develop solutions that meet your needs precisely.
- Extremely time- and resource-intensive. Probably will require significant hiring for the technical talent required and for ongoing management of each new channel and partnerships.
Large enterprises committed to a large-scale, long-term move into the new market(s), likely as part of an omnichannel retail strategy, may find this option viable. For others, it is extremely costly and far more than what is needed. In general, a fully custom cross-border and omnichannel build is probably not worth considering for brands with less than $200M annual revenue.
Work with an enabler. Find the right partner for your business, considering your size, goals, categories, and target markets. Then, work with that partner to develop and execute a market expansion launch plan. Some enablers lean on account management services, others, like Eunimart, provide a flexible platform that can be tailored to your needs. In addition to Eunimart, options to consider include ChannelAdvisor and BigCommerce.
- With the right partner, you can access multiple marketplaces and enjoy many of the benefits of a custom solution without the resource requirements and costs.
- A flexible solution with the ability to integrate your software and data and automate custom workflows will improve your operational efficiency and profitability.
- Similar to a fully custom solution, a great enablement partner can adapt and grow with your business, offering the best elements of a custom solution without the expense and long development times.
- Choosing the right partner is critical and can be challenging. Some services only support a limited number of marketplaces and other services, and may restrict expansion to a limited set of marketplaces.
- Many enablement offerings have limitations that can become pain points as your business grows. It’s critical to understand those limitations and plan for the future to avoid having to migrate to an alternative.
Selecting one of these paths to cross-border growth is a vital early step in developing your brand’s international growth strategy. However, the challenge around supply chains and shipping still needs to be addressed.
Addressing the Market Entry Challenges
To begin with, we need to acknowledge that the EU market is different from the US. For example, let’s consider something as simple as de minimis value (the product price threshold below which no import tax or duty is due). The de minimis value is the same for both taxes and duties in the US. It’s not so in Europe. In most European countries, the de minimis value for tax is in the range of EUR 25-30, while the de minimis value for duties is EUR 175-200. In other words, if your product value is EUR 100 you will have to pay taxes but no duties.
Product value itself is calculated differently between the EU and US. In the US, the reported product value is assumed to include all costs. In the EU, however, customs estimates insurance and freight costs above the reported value to estimate the CIF (including insurance and freight) price. If this CIF price crosses the de minimis threshold, you will be charged taxes and duties accordingly.
Let’s consider a simple example. You are shipping an item worth EUR 20. It falls below the de minimis for tax and duty, so you don’t account for that. On arrival, customs estimate the CIF at EUR 28, putting your product over the EUR 25 de minimis threshold for tax and incurring VAT charges you likely did not anticipate. For this reason, it’s critical to ensure that your product value is labeled explicitly as the CIF price to avoid unpleasant surprises.
The EU has 40+ member countries. At first glance it may seem that you can sell in each of these countries seamlessly as soon as your goods enter the EU. Sadly, it isn’t so. There are a number of localization requirements and country-specific regulations that are still enforced, even with the single economic zone, so it’s still better to plan your target regions in advance.
Post-Brexit there are broadly three sub-regions to consider within Europe:
- The UK
- Benelux (Belgium, the Netherlands, Luxembourg)
- Southern & Western Europe (Germany, France, Italy, Spain & Portugal)
There are multiple ports of entry to choose between in the UK. To enter the rest of Europe, you can use both France and Germany. Importing to Berlin or the south of France is preferable as the customs there are often more predictable and efficient.
You’ll need to register your business in the EU as well, and you have two options for doing this. Up to a particular salesvalue (which varies by country), you just need to register in the country of entry. Above the threshold, you need to register separately in all the countries you intend to sell.
Localization is also essential for selling in the various European marketplaces. Most of these marketplaces have specific certification requirements which you need to fulfill.
Ok, let’s pause for a breath. That’s a fair bit to consider. Now that we know the challenges, let’s look at some things that can make your life a little easier.
- Europe has one of the best postal networks in the world. From Germany’s Deutsche Post to the UK’s Royal Mail, postal networks across the continent are efficient and reliable. Most importantly, they are interconnected, making your inter-country shipping experience smooth.
- Most European marketplaces offer one-day shipping, and customers expect fast shipping times in general. Ensuring your warehouses are strategically positioned to enable speedy fulfillment wherever you plan to sell will save you a lot of headaches down the road.
That’s it from us! I hope you found our series on Selling in Europe helpful. And of course, if you’d like to learn how Eunimart can simplify selling in Europe just drop me a note at firstname.lastname@example.org.