The Role of International Expansion in Buying an Amazon FBA Business
As Amazon continues to dominate the global eCommerce industry, an increasing number of entrepreneurs are looking to buy established Amazon FBA businesses as a way to enter the market.
But before you buy an FBA business, it’s important to assess potential growth opportunities that you can use to grow the business once you own it.
One of the most powerful growth opportunities for Amazon FBA businesses is international expansion.
Fulfillment by Amazon allows you to take advantage of the booming eCommerce industry without having to worry about complex logistics or fulfillment processes. This makes international expansion that much easier as Amazon continues to strengthen its fulfillment network around the world.
There’s a lot of money to be made through international expansion. Think about it this way: if your Amazon FBA business is based in the US, and you decide to expand into Europe, that’s over 700 million potential customers right there. Talk about an expanded customer base!
But while 45% of Amazon sellers operating in the U.S. marketplace already operate in at least one other international marketplace, that doesn’t mean international expansion is the right growth lever for your business.
In this article, we’ll dive into the benefits and downsides of expanding your FBA business internationally, as well as the important factors you need to consider before going global.
This should give you all the knowledge you need to decide if international expansion is the golden opportunity you’ve been searching for or something you’d rather avoid.
The Benefits of International Expansion
Expanding into international marketplaces can open up a whole new world of opportunities for Amazon FBA sellers.
Here are some of the most exciting benefits of going global.
A Larger Customer Base
Expanding into international markets can be a game-changer for Amazon FBA businesses. It allows you to gain access to millions of potential customers that you may not have reached otherwise.
If you’re currently selling only in the US, you’re missing out on a potential market of over 7 billion people worldwide. That’s a lot of folks who could be clicking “add to cart” on your product pages.
By breaking into these new markets, you’re no longer confined to your domestic market, which can help mitigate the impact of market saturation and increase your chances of making a big profit.
One of the biggest benefits of international expansion is the boost in sales that comes along with it.
When you enter new markets, you’re tapping into a whole new pool of potential customers who may be interested in your products.
But it’s not just about casting a wider net. By expanding into international markets, you can also offer customers faster delivery and lower fees, which can make your products more appealing than competitors that only ship from the US.
One major perk of going global is the potential for immediate brand recognition in new markets.
You won’t have to go through the tedious process of building your brand from scratch, because you’ll be operating under your existing Amazon brand.
Having a recognizable brand can also help businesses stand out in crowded marketplaces.
In many product categories on Amazon, there are tons of sellers offering similar products. But if you have a recognizable brand, you can set yourself apart from the competition and build a loyal customer base.
Having a strong brand in multiple markets can also help you weather economic downturns or other disruptions in one particular market. By having a strong presence and reputation in multiple markets, you can continue to generate revenue and maintain profitability even if one market experiences a downturn.
Another major benefit to enjoy when expanding your Amazon FBA business internationally is simplified selling.
International expansion can be a real pain for traditional eCommerce businesses as they have to source new storage and fulfillment facilities and expand their supply chain into unfamiliar territory.
As an FBA seller, you can take advantage of Amazon’s vast network of warehouses and distribution centers. They’ll handle the shipping process and ensure reliable delivery to your new customers, which can be a game-changer when selling internationally.
What’s more, Amazon’s FBA program takes care of customer service and returns on your behalf. This saves you from the headache of managing inquiries and returns across different markets and time zones.
So instead of worrying about the storage, packing, and shipping of your products, you can focus on cementing your place in new international marketplaces.
Diversification of Revenue Streams
International expansion isn’t just about gaining access to a new customer base. It’s also a great way to diversify your revenue and add a layer of protection to your business.
By expanding into multiple markets, you can spread your risk and reduce your dependency on any single market. Tapping into new markets can reduce the impact of market-specific disruptions and increase your business’s chances of stability and success.
Different markets may also have different demand patterns, which can help to balance out revenue streams. For instance, if your product is seasonal in the US, it may be in demand year-round in another market.
The Challenges of International Expansion
While international expansion can lead to exciting new opportunities for Amazon FBA businesses, it’s important to remember that there are also some potential risks and challenges to consider.
Let’s take a look at some of the common obstacles to international expansion.
Each country has its own unique culture and customs, which can greatly impact the effectiveness of your marketing efforts.
Something that works well in one country might fall flat in another. So, it’s essential to do your research and tailor your messaging to fit each market.
Building brand awareness can also be a real challenge. Your brand might not be a household name in your target market, which means you’ll need to invest in targeted advertising and other marketing efforts to get your name out there.
With careful research and planning, you can overcome these marketing challenges and successfully take your Amazon FBA business global. Just remember to take into account the local culture, language, and competition, and adjust your marketing strategy accordingly.
Exposure to More Competitors
Expanding into international markets can open up exciting new opportunities for growth, but it’s important to keep in mind that with greater exposure comes greater competition.
As you expand into new markets, you may find that you’re facing off against established local players who have already captured a significant share of the market.
To compete effectively, you’ll need to find ways to differentiate yourself from your competitors. You can do this through innovative product offerings, exceptional customer service, or creative marketing strategies.
However, it can be challenging to stand out from the crowd, especially when you’re up against local players who have a deep understanding of the local culture and preferences.
In addition, competing with local players may require you to adjust your pricing strategy, which can put pressure on your profit margins. If you’re entering a market where there are already established players with strong brand recognition, you may need to lower your prices to remain competitive. This can make it more challenging to grow your FBA business in the long term.
Cultural and Language Barriers
One of the most significant obstacles you’ll need to overcome when you expand internationally is cultural and language barriers.
When entering new international markets, you’ll likely have to navigate differences in language and customs.
Cultural differences can also present major obstacles. Certain phrases or images that work well in one country may be considered inappropriate or offensive in another. For instance, a gesture that’s considered polite in one culture may be seen as rude in a different culture.
The key to overcoming these challenges is conducting thorough research into the target market’s language and culture. This may involve working with local experts or conducting market research to understand local customs, preferences, and purchasing behavior.
Different countries have different laws and regulations regarding the import, export, and sale of products. Navigating these requirements can be a real headache.
For example, some countries may have strict rules around certain products, such as dietary supplements or electronics, or may require specific labeling or packaging.
Making sure your products comply with regulations can be time-consuming and expensive, but it’s essential if you want to avoid fines, penalties, or even suspension of your business operations.
To overcome these challenges, it’s important to do your research and work closely with local experts or third-party logistics providers who have experience with regulatory compliance in your target markets. They can help you navigate the complex landscape of regulations and ensure that you’re operating in compliance with local laws.
Political instability can manifest in many forms, from protests and civil unrest to government shake-ups and geopolitical tensions.
These situations can seriously impact your business, leading to supply chain disruptions, increased costs, and even physical damage to property and infrastructure.
And as if that weren’t enough, political instability can also create an uncertain business environment, making it challenging to plan and invest for the long term.
To minimize your risks, it’s crucial to thoroughly evaluate the political climate of any market you’re considering entering. Do your research, consult with local experts, and consider diversifying your operations across multiple markets to spread your risk.
Is International Expansion the Right Option for Your Business?
There’s no denying that there are many benefits to expanding into international markets. But with that said, international expansion may not be the right solution for your individual business.
Your business may not yet be stable enough to support such a large expansion effort, or your product may not resonate with an international audience.
Let’s take a look at some of the foundations you need in place before you should consider expanding your FBA business into international Amazon marketplaces.
Conduct Market Research
Before you expand your FBA business internationally, there are a few things you need to consider.
First, you need to make sure that there is actually a demand for your product in the markets you’re interested in. You don’t want to waste your time and money selling snow shoes in a country that hasn’t seen snow in 20 years, right?
To determine if there’s demand for your product, you need to do some market research. Luckily, there are plenty of tools out there to help you with this. You can use product research tools like Helium 10 and Jungle Scout to get insights into market size, competition, and customer behavior.
And don’t forget to check out the search terms report in your Seller Central for the market you’re interested in to see how often customers are searching for your product.
If you want to really get a feel for the market, hop on the marketplace and check out listings for products similar to yours. Read customer reviews to see what people like and dislike about the product, and take note of any cultural or regulatory differences that may impact your operations.
Once you’ve done your research and found a market with potential, keep in mind that different markets come with different risks and investment requirements.
While more developed markets may offer instant returns, they also come with higher risks and require larger investments to establish a foothold. On the other hand, budding markets may offer lower risks and require less investment but may take longer to see returns.
Can You Afford to Expand into New Marketplaces?
Expanding internationally can be expensive, so it’s important to ensure that you have the necessary financial resources to support the expansion.
Remember that expanding internationally requires funding for marketing, shipping and logistics, compliance, currency exchange and payment processing fees, taxes, and more.
One way to fund your international expansion is to use some of the profits from your existing operations. This is only a viable option if your business has maintained steady profit margins. Aim for at least three years of steady profits to ensure you have a solid foundation to build off of.
Regular profits are also a good indication that your business is stable, you’ve ironed out any product kinks, and you’re a pro at navigating the Amazon jungle. These skills will come in handy when it’s time for your global launch.
However, if you’re struggling to make a profit in your local market, moving to a new market probably won’t solve your problems. Take a closer look at what’s not working and see if there are any adjustments you can make before expanding internationally.
Do You Have a Strong Enough Supply Chain?
Suppliers are an integral part of any eCommerce business, but not all suppliers are created equal.
Many suppliers are not equipped to handle the complex supply chain requirements that come with international expansion. That’s where experience and expertise come in. Having a supplier who knows the market you’re targeting can help you avoid headaches down the road.
One of the most significant challenges when expanding internationally is managing inventory across multiple locations. It’s not just a matter of shipping and storing goods; businesses must also navigate local regulations and customs requirements, which can vary widely from country to country.
To overcome these hurdles, it’s essential to partner with experienced logistics providers who can provide guidance on navigating local regulations and customs requirements.
So, now that you’re aware of the benefits and potential pitfalls of international FBA expansion, let’s take a look at the various countries you can expand into.
With Amazon Global Selling, you can sell your products to customers in more than 180 countries via 20 Amazon marketplaces. Here are all the Amazon marketplaces that are currently active:
- United Kingdom: amazon.co.uk
- France: amazon.fr
- Germany: amazon.de
- Spain: amazon.es
- Italy: amazon.it
- The Netherlands: amazon.nl
- Poland: amazon.pl
- Sweden: amazon.se
- Turkey: amazon.tr
Amazon also launched a new marketplace in Belgium in late 2022.
In a recent Opportunity podcast interview, Jana Krekic revealed that Amazon is increasing its global expansion efforts, with plans to open new marketplaces in Columbia, Nigeria, and South Africa in 2023.
How to Start Selling Internationally
Making the decision to start selling on international Amazon marketplaces could be a life-changing decision. But it’s only the first step of the process.
You’ll have to jump through a few hoops before you can start reaping the rewards of going global.
Let’s dive into the important steps you need to take to earn your first international Amazon FBA sale.
Set Up Your New Amazon Seller Account
Once you’ve decided on which international Amazon marketplaces to expand into, you’ll need to create the appropriate seller account.
Even if you already sell in one Amazon marketplace, like in the US, you’ll still need to create a new account for another marketplace, say in the UK.
Note that there is an exception to this rule. If you’re already selling in one geographical group, like on Amazon.co.uk in Europe, and you want to sell in another marketplace within the same group, like Amazon.de, you can do so from your current seller account thanks to Amazon’s Unified Account system.
Keep in mind, each Amazon marketplace has its own monthly fees. However, with a Unified Account, you only have to pay once to access multiple marketplaces within the same group, like the Asia Pacific group for example.
Keep in mind that you’ll need an international seller account specific to each marketplace you sell in.
Register for Tax
I know taxes are not the most exciting topic, but they’re a necessary evil if you’re thinking of selling your products in an international market.
It’s crucial that you fulfill all the local tax obligations for sales, import, and income taxes in each marketplace you want to sell in. This will help you avoid any unpleasant surprises or legal issues down the road.
If you’re looking to expand into Europe for example, it’s important to understand value-added tax (VAT). VAT is a tax paid by the final customer on goods or services sold in the EU. Each country has a different rate, but as an FBA seller, it’s your job to collect and remit the tax to the government every month.
It might sound like a lot of work, but it’s worth it to stay on the right side of the law.
Create your International Product Listing
Finally, you’re ready to create your product listings.
As the owner of an existing FBA business, writing product listings might seem like a piece of cake. But there are some important guidelines you’ll need to follow to make sure your listing meets the standards for your marketplace.
If you’re expanding to a new marketplace, you’ll need to do keyword research all over again. Keyword volumes can vary greatly between marketplaces, so it’s important to choose the right keywords for each marketplace you’re targeting.
You’ll also need to remember to translate and localize your listing. If you’re not confident in your language skills, we recommend hiring a professional translation service to write your product’s listing copy. After all, you want to make sure your message comes across loud and clear.
Boost Your Profitability with International FBA Expansion
As you can see, international expansion can expose your newly acquired FBA business to a larger customer base, boost your sales, diversify your revenue, and give you a much faster return on your investment.
As a result of these benefits, 50% of Amazon sellers are looking to expand into global markets this coming year, according to Jungle Scout’s latest State of the Amazon Seller report.
But keep in mind that every growth opportunity comes with its risks, and international expansion is no exception. If this is a growth lever you want to pull, make sure that the FBA business you’re interested in buying is ripe for global expansion. Otherwise, you could make a serious dent in your business’s profitability.
If this sounds like an opportunity you’re ready to pounce on, you can find high-quality FBA businesses ready for their global debut on our marketplace.
If you’re unsure if the FBA business you have your eye on fits your needs, set up a call with our expert business advisors who can guide you in the right direction.