Yes. I used to sell objects on Amazon in Europe. You can sell from just one country, but then each sale outside of that country is an "export" that triggers high fees.
For sales to be "local", products need to be stored in warehouses in each country. But that in turn means the owner of said products (the seller) has to be registered for VAT in that country, and submitting annual reports in each country's language.
I went to the trouble of registering in 6 different countries; in some countries, Amazon more or less helps sellers submit reports; in others, they offer to partner with local lawyers.
The result is a mess of reports, injunctions, penalties for late filing, etc. coming to you in Polish, German, Spanish, Hungarian. I eventually gave up.
Europe is not actually a "single market". It's a federated bureaucracy entirely indifferent (or hostile) to small businesses.
Is that with the One-Stop-Shop regulation or was that before that?
If it was before than, then the EU recognized the problem and implemented a fix for it.
Let's say I'm a German small business owner.
Tomorrow Europe becomes a single market. How do I compete with a similar business but from a country where business costs are significantly lower ?
Indeed, and that's why we need more EU, not less of it.
Having worked on the inside: this is by design. You know for 100% that Pepsico and Coca Cola unleashed an army of lobbyists to make sure the laws were written in a way where the single market only worked for large business.