If you’re an Amazon seller making use of the Fulfillment by Amazon (FBA) program, then the NARF might be your chance to expand your market. In the FBA program, you send your products to Amazon, who then stores it in their warehouse and puts it up for sale on the website. When combined with the North American Remote Fulfillment (NARF) program, sellers are given the opportunity to sell their US-based products in Canadian and Mexican markets. This is done by utilizing a global SKU that keeps track of inventory counts throughout the Amazon marketplaces in the US, Canada, and Mexico. So, if a Canadian resident buys from a US merchant, Amazon fulfills the order with the customer shouldering the shipping costs.
As appealing as this might sound, it’s best to weigh your options before committing to NARF. After all, this new Amazon program comes with its fair share of pros and cons. Here are some key factors to take note of:
- Great Market Testing Opportunity— Many Amazon sellers are hesitant to set up shop in Canada or Mexico because of shipping and storage costs. Plus, there’s no guarantee that there will be a market for their products, so the risks are high. But with Amazon’s NARF program, all you need to do is enroll and your US inventory will become available to Amazon customers in the rest of North America. Plus, there are no extra shipping or storage fees.
- Ideal for Large Catalogs— The NARF program works particularly well for sellers with a large array of products. By enrolling your catalog, you’re circumventing the logistical nightmare of choosing which products might work well in Canada or Mexico. You won’t have to test small groups of products at a time. All you have to do is enroll in the program and wait to see what the local market likes.
- Increased Potential for Sales — Finally, the NARF program is a fairly simple way to increase your market reach. Amazon is irrefutably the largest online retailer in the world and the NARF program allows American sellers to expand their reach outside of their country. The entirety of North America is ripe with online shoppers. Admittedly, this was spurred by the arrival of the coronavirus.
Take Mexico for example. The global pandemic pushed Mexico to embrace ecommerce. And despite the public’s mistrust of the financial system, they took to this digital shift out of necessity. As a result, online sales jumped by a whopping 54%, pushing retailers to improve their online services and invest in more secure payment systems. This makes Mexico an ideal place to set up shop — now more than ever.
There are also multiple benefits that come with expanding to Canada. For one, it's a much less competitive market, compared to the US, giving you more potential to makes sales. Plus, you'll find that Canadian customers are very similar to US customers when it comes to their buying habits. Chances are, what appeals to your US market will also appeal to your target market in Canada.
- Additional Fees and Taxes— If you already have a reach in North American markets, you might not need to apply for this program. That is, if you want to avoid incurring more costs. First off, Amazon’s NARF program includes extra fees that the customer must shoulder. There’s the usual shipping fee, which is already quite high for international buyers, as well as an import fee deposit. Additionally, you'll be selling your products in a foreign currency, so when you make a sale, it'll have to be converted back into US dollars first. This warrants exchange rates and service fees. Amazon usually charges around 3-4% as a conversion fee. While this might seem like a negligible amount, it can add up to a sizeable value in the long run. Lastly, there's the tax requirement. You're likely to pay sales taxes in either Mexico or Canada, then income taxes to the US government, so those bring auxiliary costs.
- Having a Local Inventory is Preferable— Given these extra fees, it might be more effective to have your own local inventory in Canada or Mexico. While this would entail more payments and legalities, the local market might get discouraged by Amazon's extra fees and purchase from local stores instead. For smaller sellers, this option might not be accessible.
- Potential Adverse Effects on Your Amazon Ranking and/or Buy Box — Lastly, there are some aspects of the NARF program that could adversely affect a seller’s ranking or buy box status. However, this cannot fully be ascertained given the mystery surrounding Amazon’s buy box algorithm. In fact, one study explicitly states that there is a lack of understanding of how it operates. Their research found that two possible relevant factors are a seller’s product prices and the reviews of said product. Going by the first factor alone, a product’s chances of appearing on Canada's or Mexico’s buy boxes are significantly lower when considering the NARF program’s auxiliary fees. In turn, this may adversely affect one’s sales and Amazon ranking.
Making the Most Out of The NARF Program
On one hand, Amazon's NARF Program provides an opportunity for entrepreneurs to expand their market reach to a much wider scale. But on the other hand, this opportunity comes with a myriad of auxiliary costs and potentially negative effects on the seller's online presence.
In truth, the NARF Program is a hit-or-miss deal. Whether it proves profitable depends greatly on the seller and their business strategies. You'll need to look at your cash flow before deciding if you can take on the added costs of the program. Additionally, you might need hard data to back up your decision of enrolling in it. Outsourcing a business analyst's services might be a good idea. Their job highlights one of the more research-driven business administration careers, as they look into important elements when it comes to strategies and policies. This helps businesses make better, data-informed decisions. As an e-commerce entrepreneur, you can gain insight into sales, consumer trends, and how these differ across countries, for example. Analytics experts can also help evaluate user personas, which will likely vary across borders and audience segments. That could contribute to the product research, development, and marketing to your target audiences. With that knowledge, sellers can optimize their sales strategies.
That said, another option is to hire marketing professionals. It's one thing to market your products in the US. However, marketing norms and trends are different in other countries. For example, in Canada, aggressive marketing doesn't work quite as well as it does in the US. You'd likely benefit more from pay-per-click advertisements. The same goes for Mexico, where advertising is an effective means of increasing customer engagement and sales. It might also be worth translating your copy to Canadian French or Spanish, as it increases your products' accessibility to different demographics.
Now that you’re aware of the pros and cons, would you enroll in the NARF program? Consider your options carefully, then decide on the course of action that is most profitable and efficient. If you're thinking of expanding to Canada and need some guidance, check out this free resource for an in-depth checklist covering the steps you'll need to take to start selling in Canada. It's sure to help you start building your international empire!