#359 – EU Market and Accounting Updates

In this episode, Bradley speaks with Matt Remuzzi of Capforge and Melanie Shabangu of AVASK to talk about the latest updates in the Amazon space regarding accounting, how the macroeconomic factors are affecting eCommerce sellers, and what should sellers think about if they’re currently planning to exit. We also cover the latest policy and regulation changes that EU market sellers need to know about.

What is EPR? How do we sellers comply with it? Our expert guests break it down and share their perspectives on these policy and regulation changes, including how they will benefit the sellers who produce top-quality products.

Today’s expert guest also share their topics on the upcoming Sell and Scale Summit! So make sure to listen to the very end.

In episode 359 of the Serious Sellers Podcast, Bradley, Matt, and Melanie discuss:

• 01:30 – The Latest Changes In The E-commerce Space
• 07:50 – Policy Changes In The European Market
• 12:00 – Breaking Down What EPR Means
• 14:00 – How Do Sellers Comply To The EPR Policy
• 16:30 – Melanie’s Perspective On These Policy Changes
• 17:30 – Are Amazon Sellers Facing Dips In Profitability?
• 20:00 – Keep Your Eyes On The Data
• 20:30 – Catch Matt And Melanie At The Sell And Scale Summit
• 23:40 – Know Your Numbers And Make Decisions Based On Data
• 27:30 – Matt’s Thirty-Second Tip
• 28:30 – Melanie’s Thirty-Second Tip

Transcript

Bradley Sutton:

Today, we’ve got Matt from CapForge and Melanie from AVASK back on the show to talk about all about what’s happening with Amazon sellers, wanna sell their business nowadays new regulations that sellers in Europe need to be aware of, and more. How cool is that? Pretty cool I think.

Bradley Sutton:

Tired of waiting two weeks to get your Amazon payouts. Wouldn’t you rather get your payouts every day if it was possible? Or maybe your interest in a line of credit for thousands, tens of thousands, even up to a million dollars, depending on what you qualify to help fund your next Amazon orders, you can do these things and more with Alta by helium 10, for more information, go to h10.me/alta. Hello everybody, and welcome to another episode of the Serious Sellers Podcast by Helium 10. I am your host Bradley Sutton, and this is the show that’s a completely BS-free unscripted, and unrehearsed, organic conversation about serious strategies for serious sellers of any level in the Amazon or Walmart world. And we’ve got a couple podcast veterans here, M and M, Melanie and Matt. Now, have you guys ever met in person yourselves or online?

Matt:

No, we haven’t yet.

Melanie:

We haven’t.

Bradley Sutton:

Excellent. Excellent. That’s what I love about this. And also you guys will be speaking on stage together at the Sell and Scale Summit. And that’s one thing we’ll be talking about a little bit later, but I just wanted to first reach out to you guys, bring you back and we’ll talk a little bit about what you guys might be talking about at the summit, but you know, this, this is 2022, you know, things are different than when you were on the podcast. Things always change in the Amazon and e-commerce world. And so let’s just first talk about what’s up in your world. Let’s start with you know Matt here first, like what’s the hot topic for you, like trends that you’ve seen things that you’ve been dealing with sellers here in 2022?

Matt:

Sure. So, one of the things that’s changed significantly just in the last 12 months is that the buying activity of e-commerce businesses has really changed. The landscape was changed 12 months ago aggregators were coming out of the woodwork. They were making big offers to e-com sellers with brands that, you know, had barely kind of hit the ground running and were just growing. And now we’ve seen a big pullback that a lot of aggregators who are busy buying have slowed way down or stopped together. A few of them have gone away completely. And the market has really shifted to where before they were trying to do volume, they were just trying to buy as many brands as they could that were pumping out a certain amount of they’ve really sort of pulled back. And they’re now looking for quality.

Matt:

They wanna see brands that can sustain, that can grow, that can maintain margins that have a competitive differentiation over other products in the same niche. So it’s really been a fast shift driven by the market we’re heading into or already in a recession, depending on who you listen to. Inflation is up, and lending rates have gone up. So, you know, it’s really changed the world of what the aggregators are willing to buy, willing to pay. And that’s changed the mindset of a lot of e-commerce sellers who are kind of looking for that, build it quick and then exit plan. They’ve had to sort of step back a little rethink what their targets are and rethink a little bit about how seriously they’re taking building a quality business over just trying to ramp up revenue and sales. So that’s the single biggest shift I would say that we’ve seen. I think in general, it’s good. It’s prompting people to run a quality business over just driving general sort of sales with whatever you can sell, however, fast you can sell it, but it’s definitely caused some pain too and caused some people to rethink their plans.

Bradley Sutton:

Okay. So then what’s the big difference then of like, let’s say, you’re helping a seller out and they’re interested in selling their business, like, is the main difference, just like, Hey, the multiples are less now or you’ve even seen some people who like might have been able to sell their business a couple years ago, but now, you know, assimilating in a similar situation, you’re advising them well, you know what I think you guys need to go back and work on your profitability a little bit more because things are different. Like, is it that extreme now? Or what do you see?

Matt:

Yeah. I mean, definitely, some people who would’ve been able to sell 12 months ago, aren’t able to sell now, right? They’re not quite big enough. And their brand isn’t quite well established enough. And their margins aren’t high enough for the aggregators to be as interested or even private buyers. And the other thing that we’re seeing is there really is a focus on building a quality business. So if you have a business, that’s just sort of a mix, you’ve got a garlic press and you’ve got a lawn mower, you know, and you’ve got some socks, right? That’s not a brand. Those are just products you found that had some margin that you decided to throw in and sell under one consolidated account. But what the buyers now are looking for is we wanna see something where a customer may actually search for a brand name and say, I had a good experience with that brand.

Matt:

I wanna come back to them and buy again. I might be interested in what other related products they’re offering, but if you’re selling, you know, fish oil supplements, and then you’re also selling a garlic press, they’re not gonna see any connection there, right? Why would I buy your garlic press, just cuz I liked your fish oil supplements, but if you have something else related to vitamin D supplements or something and you’ve built a brand and it makes sense and hangs together, that kind of quality is gonna be much more attractive than somebody who’s just trying to grind out sales of whatever kind of product they can find that they think they can make some money on those businesses, you know, can still do okay. But they’re not gonna attract the interest from buyers. And so that’s what we’re coaching our clients on is take a step back. Think about the business you’re building. Don’t just think of yourself as somebody that flips products on the Amazon platform or whatever platform you’re selling on. Be intentional about the business you’re building, if you wanna exit with maximum value at some point.

Bradley Sutton:

Okay. And now on your side Melanie, it’s been bit longer since you’ve been on the podcast. I think it was like the end of 2020. So what about you? What are you seeing differently in the world of e-commerce? You know, apart from what Matt has talked about, what have you been seeing that’s different nowadays with your clients?

Melanie:

So I think from our side, we’ve experienced a huge attrition on numbers. And then these are sellers that are expanding into new markets and I’ve experienced that sellers are sort of like more or less like consolidating now. So they spread on expansion. It’s sort of like more refined now, even though we are seeing Amazon introducing new platforms or marketplaces and you would expect that people will be going crazy, I would say sellers. And I don’t know whether it’s because of their inventory strategies that has been there and the cost of transportation that they’ve gone up. So, sellers, they are being very careful on how and which platforms they’re expanding to. And I would say there, there’s more introduction of strategy now on sellers than I’ve ever seen before.

Bradley Sutton:

Interesting. Interesting. Okay. Well what about new, like on the legal side and new rules and stuff, especially in Europe, you know I remember you had written an article for our website about the VAT e-commerce package and things like that. So what are some things that, that people selling in Europe, whether they’re Europe based or whether they’re American based and selling in Europe, what are some things that are new-ish in the last year or so that people need to be aware of?

Melanie:

So we’ve had a lot of changes, 2021 and 2022. So 2021, it saw Brexit being kicked in and the new changes in customs rules, but also European market countries. They were actually some of them, they didn’t know much about eCommerce. They had to get themselves up to date on how e-commerce actually works and jump in the trend and understand Amazon in particular as a platform and also understanding Amazon seller, what it looks like because they’ve introduced these rules, which they were rather late, they were running about five years late on the introduction of those rules. So we saw the customs changes. It meant that there was a division now between the UK and the EU 27 from a shipping point of view sellers where they used to ship just in the UK. Only there were now that wasn’t going to be possible for them to carry out trade across Europe and as well as the UK if they shipped, shipped in one country.

Melanie:

So, which means, you know, shipping had to be distributed into two. So one coming into the UK, one going into, Europe, we saw the UK introducing postponed VAT accounting to support sellers so that they didn’t have an initial outlay of cash, followed by France as well, which came from literally nowhere postponed VAT accounting. And, and that’s the good it, but we saw also Germany being a bit more difficult on sort of like accepting shipments for companies that didn’t have representation in Europe. So, which means there was an introduction then of indirect representation and that’s where us as a company, we thought, how do we support sellers during this time? Because it’s not just about you hiring and shipping company, shipping the product, you need more than that. Now you need a customs representative or an indirect representative.

Melanie:

And that’s where we came in. And after that in July, 1st of July, 2020 one, there was IOSS and OSS rules, which were introduced to simplify the VAT on how VAT is calculated in Europe. We saw in 1st of January, 2022, and very recently six months ago, we saw the introduction of EPR, which is a Carbon Tax on any goods that are being sold on platforms. And now as, as sellers and producers, we need to be responsible for the life journey of the products that we sell on markets. And as you know, there are treaties that are there across the world about climate change. So this is to combine–

Bradley Sutton:

Does this affect all of Amazon Europe, or like only Germany, or which?

Melanie:

This is gonna be rolled out in all of Europe, but as of today, it’s in France and Germany.

Bradley Sutton:

Yeah, I remember we have a German podcast and Marcus actually interviewed somebody from Amazon Germany about this, but I don’t speak Deutsche. So like, I can understand what they’re–, but I saw something about EPR and this and that. I was like, okay, this must be big because Amazon actually wanted to come on the podcast. And then I just remembered the word, the letters EPR, but I didn’t use Google translate to find out totally about that. So, yeah, please continue explaining about that, about that.

Melanie:

Yeah. So, EPR is an Extended Producer Responsibility. What it means is that every product that is sold, so the seller is dimed as the end-user of the product, even though it’s going to another consumer. So there is a tax contribution. This is just in simple language, there is a tax contribution that has to be made by–

Bradley Sutton:

Somehow you mean your simple language goes above my head sometimes, cause I’m kinda dumb when it comes to these things. But please make it as simple as possible.

Matt:

I translate this as it’s gonna be expensive. That’s what I would translate it to.

Bradley Sutton:

Yeah. Yeah. That’s more my language there. Continue Melanie.

Melanie:

So it is a text that is charged on every product that is being sold. So, which means–

Bradley Sutton:

That I understand, okay. A tax on new products. Okay. That’s not what I wanted to hear or what other sellers hate, but we have to keep it real here. Okay.

Melanie:

You know, when you talk about tax, I think sellers, they, they think, oh, another tax, it’s another VAT. It’s not VAT. How, how I actually translated is if you go out with the family for dinner every month so this time you’re gonna have to just miss one of your expensive dinners to contribute towards their environment. So it’s an environmental tax that’s sellers are contributing towards. So we have a responsibility as individuals with the client, with the environment on how things are going at the moment. So that’s why Germany has introduced it. So Germany kicks in actually on the 31st is is, is the deadline Soman come 1st of July, it is in a week’s time. People have to be compliant France already kicked in on the 1st of January 2022. So right now we are in the middle of a storm here at AVASK whereby we are looking to get sellers compliant fast–

Bradley Sutton:

What does that mean? Like is this something that sellers need to start calculating and remitting themselves? Or is this something that Amazon is adding to the retail price? Is it something that Amazon is automatically taken away? Like how do sellers say in compliance with this,

Melanie:

So they need to know their life cycle of their product, what products are they producing? How much plastic was there? And then we do the calculations internally and then send those calculations to the eco-organizations that are responsible to charge that amount of tax. So Amazon, as a platform, they have a responsibility to ensure that everybody that is trading on their platform is compliant. And for us, we’ve got a responsibility to our sellers to make sure that they are compliant. They are VAT, sorry, they’re registered with Ecotax or EPR.

Bradley Sutton:

So then how is that calculated? Like how do you know how much that is due? Is it based on the life cycle of the product or it’s just a standard percentage, or how does that work?

Melanie:

It’s based on volume. The volume of sales and the amount of products that you’re selling and what type of product you are selling.

Bradley Sutton:

Wow.

Matt:

It sounds like another reason that people might consider not moving into the EU, right. If you’re doing well in the US, this is just one more hurdle to kind of get over and you say, you know, skip one expensive meal a month, but I worry about the people who are already eating ramen and skipping meals, right. They don’t have the room to skip another expensive meal cuz they were eating them in the first place.

Melanie:

Right.

Bradley Sutton:

So is that something that even like, let’s say me as an American person selling in Europe, I would be responsible for, or is this only for your EU citizens?

Melanie:

This is for anybody that is gonna be selling in particular, in Germany and France. Those are the two countries that have introduced these rules UK is gonna be coming up now which is next year. So, I mean, at the end of the day, all countries in Europe would be introducing this. And this is where the opportunity I see. I think it comes through in as an American, you saying that it is too much rules. I can’t deal with. That’s why I am here to support you with those rules, but also–

Bradley Sutton:

Oh, you know, us too well.

Melanie:

But also I think what is important is to understand the opportunity that is available. So the barriers of entry, they are now a bit higher from a compliance point of view. So which means you need to think very strategically, if you are going to be looking at launching. But that market that has got higher barriers of entry, what it does is that there is fewer people, but wants to go there. That’s where the opportunity lies for the seller that is serious about selling. So which means it’s not now a market for opportunists. It’s not somebody who’s just picked up a pair of sock and think, do you know what I’m gonna just tip, Melanie, on the product with the funny photo and it sells that product. It’s gonna be the people that have developed a very good product. That’s how I introduce–

Bradley Sutton:

That’s another way of looking at it. So yeah, I like that, you know, it weeds out the lazy competition of the people who just using, trying to use black hat strategies. You can’t really get around things like this. Okay. I get that. Now coming back to America here, you know, like you know, Matt, we talked a little bit about inflation and then, especially the last year and a half, you know, shipping prices shipping times, I would imagine overall you’ve maybe seen a dip in profitability amongst your customers or how much money they’re they’re clearing at the end of the day? Or are most of your clients you see, like have just been trying to raise prices to counteract some of these things.

Matt:

We’ve definitely seen a dip in profitability on average, there are still some people doing well, but I mean, they’re kind of facing a number of headwinds. One even just, you know, not that many years ago, you didn’t have to spend nearly as much on ads to rank and get traffic, right now, even with a well-established product and established brand, people are searching for your brand name. There’s still competitors now launching sponsored ads against your brand name. So even with that, you’ve gotta spend ad money that you didn’t used to have to spend. Then of course, you’ve got shipping and logistics, challenges and costs there. You know, the price of diesel keeps going up and up. Everything is just getting more expensive to get here. But then again, at the end of the day on the Amazon platform, right? When a customer goes to search for a particular product, they are presented with a ton of choices.

Matt:

So your pricing power is still kind of held down, right? If you try and keep adding costs to the product, to fight your costs and inflation and maintain your margins, somebody else is coming in and grabbing that market share competing with you on price, and customers at the end of the day are, you know, price sensitive, especially now because they’re dealing with inflation, they’re seeing the value of their paycheck go less far than it used to, so they’re more price sensitive. So what that means is really for our clients, our sellers, they’re really facing a shrinkage of their profit margin, the way to combat that, what we’re coaching our clients on doing is one, again, making sure that you’re really being careful about the products you’re selling. You may have a product that used to be profitable. Now it’s break-even, or even losing money.

Matt:

You’ve gotta monitor that constantly. And if products are now losing money for you, stop selling them, right? People kind of get lost in the well, I’ve gotta mix overall and I make money overall, right. But 20% of your products are actually negative for you. So you’ve gotta cut that. And then really monitoring ad spend, it’s easy for ad spend to kind of get outta control. You’re testing keywords, you’re testing different strategies. And then you find out 50% of your ad spend was probably wasted on, you know, negative returns or even zero returns. So keeping a careful eye on that data, watching the numbers like a Hawk is the way to try and maintain what you can of your profitability. If you’re still, you know, just seat of the pants guy, that’s just winging it. You’re most likely the one that’s gonna feel that pinch first and go negative before anyone else.

Bradley Sutton:

Yeah. Well, I mean that kind of almost goes along with what you know, Melanie was talking about is this kind of weeds out some of those just hobbyists or Hey, anybody can just throw something up and have success. No. And so now things are getting so saturated, but now it’s like, Hey, you wanna start a business on Amazon or you want to keep it going. You really gotta be some of the best of the best. And so now if you’ve made it and you figure this stuff out, you know, you don’t have as many competitors as you did before now. Another thing we talked about earlier is you guys will be speaking on stage at Sell and Scale Summit, and actually speaking on stage together.

Bradley Sutton:

That’s something that we wanted to do a little bit different here at our conference is we wanted to not just have, you know, there will be a couple we’re not sticking somebody with Gary Vee and like let’s have a counterpoint here or something like that. But for the most part, we wanted multiple people on the stage at the same time, who are experts in their field. And both of you are experts in your field, but who didn’t necessarily know each other, they didn’t have like some hidden agenda to pump each other up, you know, not to say that you guys are enemies or anything like that, but it gives people a little bit more peace of mind, like, all right, well, you know, just Matt is up here and nobody’s on this stage, you know, he can just say whatever he wants and, you know, I guess I gotta tell and would–

Matt:

I would just say whatever.

Bradley Sutton:

Now all of a sudden Matt’s up there and he says something and then we got somebody like Melanie to kind have check like, wait a minute, Matt, like I don’t know about you bloody American talking about this kind of thing or whatever she would say. But you guys can do like points and counterpoints. That’s something different that we’re doing at Sell and Scale that we have multiple experts on stage at the same time. So now I know we’re still in June, July, and I know you haven’t prepared your presentation fully yet. It’s not until September, but I would love to get like, just a sneak peek from both of you as to like maybe a cool tip or something that you’re gonna be talking about on stage to get people excited. Like, cause again, it’s sometimes hard to get, let’s be real, it’s hard to get excited about accounting things and taxes and stuff.

Matt:

What? Oh, how could you say that?

Bradley Sutton:

But it’s arguably one of the most important things, you know, arguably one of the most important things that every seller has to deal with. And so you guys make boring things and unsexy things interesting. So what are these unsexy things that you’re gonna be making interesting? Let, let’s just stay with you for a little bit Matt.

Matt:

Well, I think one of the topics that we wanna talk about is just the general importance of this information, right? I still run into sellers daily who are, you know, well, I kind of keep track of some stuff in Excel. And at the end of the year, I give a bunch of stuff to my CPA and he tells me if I made any money, but you know, those days are really kind of over as we’ve just been talking about, the world keeps getting more complex. Competition keeps making things harder, prices keep going up. And so your profitability is more challenging. You really have to be involved in your data on a regular basis. You have to be looking at the numbers, know your numbers, and making good data driven decisions. And I don’t think Melanie and I are gonna have a difference of opinion on that.

Matt:

I think what I might look at is to say, well, maybe, you know, moving, if you’re a US seller successfully selling here, you know, you may want to give a second or third thought to expanding to the EU and UK, because there’s gonna be regulatory challenges. And that may or may not make sense. You really have to understand your profitability to know if that move is gonna work for you. And then I’m sure Melanie can, you know, okay. But we can help with the regulatory. And to her point, it’s an opportunity. If you can overcome those barriers, you know, you can be successful and great, then we can make sure, you know, that your numbers prove out that you can sell successfully not only in the US, but the UK and the EU as well. So we are gonna talk about, you know, the importance of understanding your data, having it accurate and current and timely and using it to make decisions. And then, you know, I think there, one of the decisions you can definitely consider is how you can move and expand and make sure that you’re successful in other countries, other platforms with regulatory assistance on some of the stuff that’s just too challenging for a small business owner to get on their own.

Melanie:

Yep.

Melanie:

Okay. Excellent. I’m excited. I hope everybody else out there is too. Melanie. What about you? Well, what’s a little sneak peek about what you’re gonna be talking about as well.

Melanie:

Yeah. So I think Matt is spot on there and, you know, they say that tax or accounting or figures are actually boring. There’s one thing that I’m gonna give credit to aggregators when they came into this space because I think when they came into this space and everybody was sort of like on the selling mode everybody got, I would say more compliant. Everybody wanted to make sure that their accounting is in order, their bookkeeping. And, and it’s sort of like motivated people to current to start doing or preparing SOPs and put them in place and have their management accounts on a monthly basis and just know their finances. So that’s what aggregators did they sort of like threw a bit of some motivation. Now, one thing that I would say is that selling of Amazon businesses has been there before aggregators. So, which means there still opportunities. There, there will still be other companies that will might see your business to be attractive. So do not lose the momentum. So let’s make accounting tax global expansion, even sexier than people.

Matt:

Even sexier. I like that.

Bradley Sutton:

The phrases that you have never heard on a podcast in history. So instead of the mega hat, it’s gonna be MASA, make accounting sexy again is gonna be your–, I love it. Speaking of making accounting sexy again, I want both of you in some bright colors at Sell and Scale Summit for my Zumba fitness dance class that we are going to be doing on one of the mornings. And let’s just show people how sexy accounting can get. How about that? Can I have a commitment that you are coming in the morning to the Zumba class?

Melanie:

Game on Yes. We’re gonna be there.

Matt:

Yep.

Bradley Sutton:

I was about to say, Matt, is somehow very quiet here, but he spoke up there alright. Excellent.

Matt:

You may regret inviting me.

Bradley Sutton:

No, not at all.

Matt:

But I will come.

Bradley Sutton:

Excellent. All right. Let’s close out with as we always do with TST 30-second tip of the day about any subject you guys want from each of you let’s start with Matt.

Matt:

So the 30-second tip of the day is once again, make sure that you have your numbers current and accurate, and that you are using them to make good business decisions. I know it’s easy to go with your gut. I know it’s tempting to think, Hey, I’ve been doing this a long time. I know what I should be deciding, but let’s make sure that you’re also using data to validate your decision making so that you don’t make a mistake because in this business, mistakes can be costly. Gut feelings can lead you down the wrong path and take capital and profits away from something you could’ve been doing that would’ve been adding to your net worth instead of taking it away. So please make sure that your accounting is current and accurate and up to date, and that you’re using it to help you make good decisions around your business.

Bradley Sutton:

Okay. Excellent, Melanie.

Melanie:

Yeah. I would say from my side, it’s about diversification marketplaces opening up all the time and expanding to new countries. So do the same, diversify your income streams. Do your market research before you expand into new countries, and know about what your competition is actually doing. Construct a customer advisory program, leverage your social comments, and also look for funding to expand your business further. I think that’s 30 seconds.

Bradley Sutton:

All right. Yay. For some people, the T in the TST means like two minutes or three minutes, but you guys kept it right on there. All right. So guys, if you haven’t gotten your ticket yet to Sell and Scale, make sure to go to h10.me/s3, h10.me/s3. Use the code S3BS100, I think BS stands for Bradley Sutton, not something else, but that’s my initials right there. S3BS100 guys save $100 off and then make sure you guys come to the Zumba class too, and check out how people who deal with numbers all day, how they still know how to party and get down and dance, not the night away, but the morning away. We dance the night away with Nelly. You guys are hoping our Nelly fans would come to the concert there. Yeah. All right. So Melanie and Matt, thank you so much for joining us. And I’ll be seeing you in Vegas in a couple of months.

Matt:

Sounds good. Thanks.

Melanie:

I’m excited to be part of your class. Thank you, guys.

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