Selling on international online marketplaces

The majority of all online sales to consumers are through online marketplaces. This share is expected to continue to grow in the coming years. An online marketplace is a digital third-party platform that matches supply with demand. It is a place where buyers and sellers can meet and strike a deal. The owner of the platform manages the marketplace and supports buying and selling. In this article, you will read about what you should consider when offering products on an international marketplace.

5 benefits of online platforms

Listing your products on online platforms has a number of advantages.

1. No big investments are needed. You pay the online platform a fee for every item you sell, also known as commission.
2. You save costs. You do not have to build and update your own website with a local domain name. Also, marketplaces often have well-established processes for order processing. And they protect you from the risk of unpaid bills, fraud, and disagreements. 
3. You get to piggyback on the marketing efforts and reputation of the platform. So, for example, you will not have to invest in getting visitors to find your website. The online marketplace is doing the marketing for you.
4. The marketplace takes care of all additional administration. Many online platforms facilitate the complete purchasing process with a so-called fulfilment service. This service covers the ordering process, payment, customer service, and logistics.
5. Foreign sales platforms are a relatively quick and easy way to gain access to foreign markets. You tap into new target groups and get more turnover. 

5 disadvantages of marketplaces

There are also disadvantages to doing business with online platforms or marketplaces.

1. If your product sells well, there is a chance that the marketplace will start selling a similar product itself.
2. Selling your products on a foreign online platform will get you less brand recognition than selling products on your own website. The same goes for contact with your customers, as the platform will take care of most communications.
3. It is important to accurately monitor your inventory levels. Delivery problems will mean you get penalised. Your ranking on the online platform may suffer as a result. In extreme cases, your account could even be closed.
4. Marketing and all the other work done by the marketplace comes at a cost: a cut of your profits. Some sellers complain about the high commissions that some marketplaces demand.
5. Selling your products on online platforms creates greater price transparency, as your products are listed alongside similar products from other sellers. You will also have to share your content and product descriptions with the platform.

Costs

You have looked at the pros and cons. Now you want to offer your products on an international marketplace. This costs less than building a web shop with a national domain name in another language. However, the marketplace does charge fees. Take at least these costs into account:   

• You need an account per marketplace. This costs a flat fee per month which varies from one marketplace to the next. Compare marketplaces before making your choice. Listing products on the platform is usually free. 
• You will need a financial buffer to pay for your inventory. You will not receive your first payment from the marketplace until later. Often a few weeks after a customer has bought and paid for your product on the marketplace. 
• You pay a fee for every item you sell. This will usually be a percentage of your revenue. The percentage differs per marketplace, as well as the type of product sold.
• If your type of product is new to the marketplace, remember there may be additional costs. Translation costs of your product's description on the website, for example.
• Many marketplaces offer a fulfilment service. They keep your products in stock in their logistics centre and handle all logistics. This service usually costs a flat fee per parcel, but dispatching orders yourself would also come with shipping costs. Having products in stock locally may have tax consequences. For instance, you may have to apply for a foreign VAT number and file a VAT return abroad. 

VAT

Platforms may ask you to prove that you are registered for VAT in the country of sale. So-called platform fiction applies.to some marketplaces This means that platforms that facilitate transactions may also be responsible for collecting VAT. Many Dutch entrepreneurs stock products on German marketplaces. These platforms then often have additional requirements.

Check the terms and conditions

Look carefully at the terms and conditions of marketplaces. Marketplaces often have multiple warehouses in different countries. They decide from which country they deliver products to consumers. Check whether you agree to this in the terms and conditions. Do you not check this? And do you sign the terms and conditions unseen? Then the marketplace can store your products in a country that is not convenient for your business. This has tax implications. You will then be required to register for VAT in that country.

Example

You sell products to Italian customers through a marketplace. You thought the stock of your products was in Germany. Now you find out that the marketplace has some of your products in a warehouse in Italy. So these products are in stock in Italy, shipped from Italy, and stay in Italy because that is where your customer is. This means you have to send the customer an invoice with Italian VAT. The Italian tax authorities see this as a domestic delivery. For this, you need an Italian VAT number.   

Germany

German marketplaces like Amazon and eBay require Dutch sellers to submit a VAT certificate if you want them to keep your products in stock. This certificate states that your company is registered in the German VAT register with a Finanzamt (in German) and is issued upon request. If you sell products on a marketplace but are not subject to VAT in Germany, submit a statement declaring that you do not need a VAT number.

Online marketplaces in Germany also have a general duty of disclosure. This is Article 312 of the German Civil Code (in German). As part of this duty, marketplaces have to disclose if sellers are businesses, among other things.

Platform-to-business

The EU has a European platform-to-business regulation. This is called the Regulation to promote fairness and transparency for business users of online brokerage services. These rules give entrepreneurs more certainty when doing business with digital platforms. Even online platforms without headquarters in the EU must follow these mandatory rules. For example, Amazon, Facebook, and Google. These mandatory rules are only for platforms with business providers whose customers are consumers. 

For more information on the regulation, download the European Commission's FAQ (PDF). 

Other European regulations

In December 2020, the European Commission (EC) published two proposals for new regulations for platforms, the Digital Service Act (DSA) and the Digital Market Act (DMA). With these rules, the EC wants to strengthen the position of internet users by limiting the power and monopolies of the largest players. The largest online platforms receive extra supervision and rules. In addition, providers of digital services are given more responsibilities towards their users. The Digital Markets Act and Digital Services Act form new, modern legislation for Europe's digital economy. 

DAC 7

DAC7 came into effect on 1 January 2023 with the EU Directive on Administrative Cooperation. These regulations concern the exchange of data by digital platforms. Under this act, platform owners are required to provide information about sellers on their marketplaces to the national tax administration. The tax administration then shares this information with other EU member states.

DAC7 applies to any business selling products or services on an online European platform. Or through a digital marketplace with European customers. The platform will, for example, pass your account number, name, and address information to the tax authorities.

Stepping stone

Selling your products on an international marketplace can be a stepping stone to a foreign online shop of your own. You can also use your sales figures to do market research, which will reveal if there is a market for your products in a particular country. If your products prove to be in demand, you can always decide to start your own online shop later.

Start small

Focus on foreign markets where you see opportunities with your products. Or sell only certain products internationally. Selling directly to the whole world is usually not feasible. And be prepared for international cultural differences. Even if your webshop stays within Europe.