In this article, let’s talk about the difference between Amazon UK and Amazon USA in online arbitrage.
I’m going to be talking with a good friend of mine, Gavin Sweeney. And I’m really interested to learn about his experience in selling on both Amazon UK and Amazon USA by doing online arbitrage.
Topic Rundown:
- Who is Gavin Sweeney?
- Comparison of Amazon UK with Amazon USA?
- Why change from Amazon UK to Amazon USA?
- What did he see in the Amazon USA market that made him forgo his UK company?
- Pros and Cons of Amazon UK and Amazon USA in his experience
- Advice to anyone debating on what market they would want to enter
Who is Gavin Sweeney?
He is a UK national who first did online arbitrage in the UK marketplace for a year and a half and did about £970,000, then turned to Amazon USA. Why? Because he was losing money by not moving quickly enough, so he left. And now selling on Amazon USA specifically, not in the UK marketplace anymore. He has an American company and last month they did 170,000 in sales. Currently expecting to do $160,000 to $200,000 in the following months. He just accepted a 164K that came from Amazon, where things are starting to ramp up things big time.
Comparison of Amazon UK with Amazon USA
For Gavin Sweeney, doing online arbitrage in the UK is still good, but for him it’s limited. In terms of how much it scales. It’s good in terms of clearance sales since you’re going to be able to pick up stuff that not many people would be able to pick up. But when it comes to online arbitrage, it’s very important to know your niche.
For example, if you only do a certain category like common beauty and source at common websites. Then you’re going to be in trouble since everybody who is new to online arbitrage will also be sourcing on these websites. So, selling on Amazon UK is good, but you really have to niche into very specific categories and find something that works for you. Then, don’t share that with everybody in the business. Only perhaps, to your inner circle and grow together.
Common categories are a very good entry-level for beginners since you could definitely make money but once you registered VAT, and still don’t change your niche. You won’t be able to grow. Adapt to what you’re doing, then you will struggle less. Earning your high capital from common categories will give you a chance to accept very low margins but it doesn’t matter as much as you’re still making a profit.
Why change from Amazon UK to Amazon USA?
For Gavin Sweeney, the period of March to April is the savage period for the UK marketplace. And as they are doing beauty, accepting low margins, he noticed that he was making significantly less. Also had the option of changing the net from the market and would do something different. He jumped to a market that is 5 times larger, which is the USA marketplace. It made more sense to him to go to a much bigger market where there’s more opportunity. Even though having a larger market means having more competition relative to the UK marketplace, there’s still less.
How did he transition from Amazon UK to Amazon USA?
The whole transition he states was “learning lessons on what not to do”. Though it was a success, in hindsight, he could have given more support through the transition as well, and to create a more successful and seamless transition. It would need a well-thought-out course of action. He moved two of his best sourcers to the USA to a pre-owned American LLC company (which doesn’t need an American-based billing address) and had his admin virtual assistants working half between each, and moved over the third sourcer. The whole endeavor spanned 1 to 2 months to fully transition, which culminated in him making the decision to shut down the UK company to fully focus his efforts on Amazon USA, which granted him significantly better net margins.
What has he learned from the transition?
Because his UK team has been working well and getting comfortable within a certain niche, he found that moving them to the American market – their skills did not carry over, and they couldn’t handle it. He finds gaps in the analysis; making him realize that the analysis is not where he wants it to be. He states that one of the circumstances that could be encountered in transitions like this is that the team’s skills may get soft due to complacency in fitting their niche and doing it well, which keeps them from giving the same effort into improving said skills making them unfit for a new market. Having a more versatile and open personality to change improves the chances of a team being able to adapt to a new market environment.
8 Things I learned about Reselling on Amazon from Gavin Sweeney
Moving the business from Amazon UK to USA takes careful planning and proper management of your team. I've interviewed Gavin Sweeney to talk about opening his Amazon business in the US and the lessons he has learned in the process.
What did he see in the Amazon USA market that made him forgo his UK company?
In one simple word, he described the market as being “easier”. What he meant by this is that it is easier to spend money in the USA market than in the UK market. All the rewards in the USA were better than in the UK, his example being a 15% cashback on a multitude of websites. Money in the bank is doing nothing, it isn’t earning for the business, he finds that is easier to spend because the market has an easier way for companies to spend their money.
Though he still makes mistakes due to being completely new to the market, he finds that his margins are higher compared to his experience in the UK market. Said margins were 5-7% in the UK market, which turned into an instant 10% net margin. Further cementing this disparity is his ROI when compared between the two companies, his UK ROI. was 15-20% but in the US it has jumped to 30-33%. He is quoted as saying, “It just makes so much sense, we’re making double the money. Let’s just move.” Even if said growth in margins wasn’t the case, having higher spending and moving that money into stock still yields a higher profit down the line.
Pros and Cons of Amazon UK and Amazon USA in his experience
Pros
Being a citizen inside the UK, he says that a pro of conducting business in the UK is that it is at home and comfortable. He could rely on more people when inside the UK, his friend or family, he didn’t have to adapt and is already well versed in the market. A con for him being in the UK is that he found that to be successful he had to niche down a lot due to the market being very saturated. There are fewer niches and fewer opportunities. Margins are lower, and sales velocity per sales rank is exponentially smaller.
Cons
He then continues that the cons he found in the USA are that the cash cycle is a lot longer and that if you fall down into a very general niche that there’s a high probability of your business tanking as is in the UK. The services are more expensive, and your CPA / accounting is more expensive. Though he states that the pros outweigh the cons because of having a larger market, a higher sales velocity, cash-back rewards, and conversion bonuses are also a plus. The margins are significantly higher; the ROI is higher. There are an infinite amount of niches that you can explore and an infinite amount of sourcing techniques you can use. A massive wholesale market, due to more people visiting the USA rather than the UK. And importantly, the USA has a big spending culture. The USA he finds is a lot more self-sufficient as a country when compared to the UK.
Advice to anyone debating on what market they would enter
He says that it depends on where you live and what your circumstances are. If you live in the USA, go to the market in the USA. But if you’re in the UK and you have 15,000 or 20,000 to spend in a business, the question is “How much time are you willing to put into this?” if you’re just dipping your feet in then go into the UK, but if you’re going to go all in, then head straight to the USA but you have to mentally committed and prepared for it due to the statute costs of starting a company in the USA. If you’re 100% committed and new to the Amazon scene overall and you’re putting in 4 to 5 hours every day, then head over to the USA.
He continues to say that if you do find a niche or a market in the UK which has a good margin and good returns, you should keep that going or maybe even think of focusing on growing that instead of switching to the USA. But if your niche is destroyed, or you feel that you could do better in the USA, then by all means switch to the USA, but outsource the UK company to keep a stable stream of income coming from it and then expand to the USA. You’d need to have good capital to start with in the USA, he says, that it would need to be 15,000 or above. As a rule of thumb, he says that if 20% of your capital is gone just because of services, then you should invest a little more.