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Amazon's entry on the Danish market approaches. What does this means and what do you need to consider as an e-commerce business?
Amazon is in Denmark with a Danish platform before the calendar year says 2019. In recent months, I have soaked up every opinion and impression about what industry professionals, opinion makers, and popular media think about Amazon. I have been in London and talked with Google, visited conferences, and used way too much time on LinkedIn-articles when the children were put to bed. In a broad outline, (almost) everything is a bogey added a dose of good business talent, and cry wolf campaigns. A typical outline tells about Amazon taking over 20% of all online retail-sale, but most shops and stores are ready. The day Amazon arrives, the local merchants will roll up their sleeves and customers prefer to do business with their local merchant anyways, as he is so nice, which Amazon cannot be online. So, everything will be just fine. Why 20% market share exactly I don’t know, but the share for established Prime markets is about 50% for the US and both DE and UK are at 33%. Amazon approaches 10% of all retail trade in the US and about 4-5% in DE and UK. At the same time, it is the player that by a length increases its market share the fastest – typically by 20% - 30% a year. This means, they take all the growth plus extras in the retail market. In Denmark, we happily get cat litter, batteries, books, training gear, and electronical devices at the local grocer, bookseller, or sports retailer instead of ordering via Voice Command Devices like Amazon Echo and get it delivered within a few hours at the cheapest price and with free delivery.
A defence from the established retail industry is focus on the morally and politically wrong signal it sends trading with Amazon, as all the employees are underpaid and work under slave-like conditions. The products are also counterfeit products produced under inhumane conditions and filled with toxin (like Squishies sold in “real” toy stores). On all these fronts, there are issues without a doubt, and it is open to criticism that the world’s richest man, who own the entire food chain from production, sale, stock, and supply, can’t affect this part more. When Jeff Bezos is so good at affecting the bottom line’s results. Therefore, there always need to be kept an eye on production methods, product chemistry, working conditions, and tax evasion. Exactly like any other company in Denmark, SKAT, a lot of authorities for food, labour market, competition and safety will do continuous testing. What happens with the products and services in this small country is so reasonably protected by rules that I doubt the chauffeur delivering a box to you works below minimum wage, does not pay taxes, and is pressured to work without sleep, food, breaks etc. That we need to go through EU to align to a bigger picture is given for Amazon as well as for any other industry and political issues. Today, we experience terrible and highly dangerous workplaces in Asia, Africa, and South America. We did that too in the 80’ies, 90’ies, and 00’s, and that will probably be the case regardless of it being Amazon or someone else handling imports and price negotiations of goods from the world’s biggest production unit in China and India. Therefore, development of third-world countries and international cooperation regarding supervisors, certifications etc. must continue to be activities we are dedicated to. Our trade and transportation of goods across countries and continents will probably not shrink in the years to come, despite a man with funny hair in the US who have done his part.
If you set aside the scare campaigns and politics, what is Amazon then really about? First of all, it is a gigantic trade platform where all manufacturers and distributers can choose/try to get their good sold. As such, you have the option to jump on that train rolling right by you in a moment. My guess is that it will be the first and only time in the 21st century we will experience a disruption giving the competitors this much time to prepare. Amazon is an old friend, competitor, and college. Amazon is from 1994, in 1998 you could buy more than just books and in 2005 Prime and Cloud Services came along. Since then, the primary format has not changed much. Streaming, Echo, and AI is almost just Amazon keeping up with time. Nobody doubts that www.amazon.dk will shake things up, but Amazon’s secret weapon is that there is this mystery about “what do I get started”, “should I be a “beat them” or “join them”, and “do I lose or make money on selling through Amazon”, “will they take my products and make their own label”, etc.… This makes it extra difficult figuring out a number of risks connected to Amazon and that is exactly what leaves many in a passive waiting position. What I actually admire Amazon for is that they fairly display an “open” platform so that you will avoid great set-up costs related to “real” e-commerce. Kruso lives on building e-commerce solutions and it pays our wages but that does not change the perspective and the interesting challenges Amazon brings. It is challenging to lay down and enforce a clear Amazon strategy - specially for the bigger and more complex players that are typically our customers.
At Kruso we have the assumption that we deep down don’t know, what we can offer our customers and future customers before we know their business and current situation. We have some given settings and frames.
We know, what kind of resources, know-how, and tech we have, and how they can deliver in different constellations.
We know we can achieve a unique product with the customer that is innovative and moves the customers business in a new and wanted direction. We are not a fan of box thinking as the context is key to finding the right solution.
We notice there have been drawn some clear lines about what to do regarding Amazon. These prophesies are based on assumptions and hypothesis in an imaginary example that only works with a number of definitions in a closed environment. Amazon is everything else. Our global e-commerce environment is everything but static and closed. Unfortunately, this means you cannot just put up a number of premises for estimate and assess whether you are competitively challenged by Amazon or someone else digitalizing you and your industry. Therefore, I cannot say whether you should be on Amazon entirely, partially, or not at all.
In my search for knowledge about Amazon I have heard things like: “What is my risk compared to my industry”. Eh, what does that have to do with Amazon? We have gradually acknowledged that all industries that can be digitalized share the same risk (I love that you don’t focus on the positive and call it sweet spot, unclaimed market, etc.?) of experiencing changed market conditions (buzzword: disruption) through an immediate or gradual transformation. Some industries are hit over night. Those are the industries we hear about while other industries are digitalized through a lot of small steps creating an evolution. That is why, Amazon in itself is not a parameter for your business’ competitive situation.
If you have a strong brand you should never join Amazon. Then it is just a shame your distributers and retailers may have a different opinion, and as a multinational brand you don't have 110% control over your sales channels meaning you might end up finding your products on Amazon anyway. Maybe you should focus on strengthening your brand so exactly your products are sold on Amazon rather than the million alternatives available on Amazon. It is true that you don’t get the same unique buying experience as in your brand store at Strøget or in your B2B showroom, but is that not the purpose of brand stores and showrooms - to give the unique feeling that can trigger your emotions and make you think of a brand when you need a new product in a category your brand is represented? So, if you have a strong brand you can easily survive on Amazon if your brand really is strong. If you have complete control of your sale channels, it is up to you to decide if Amazon is something for you - if not your starting point is something completely different.
Yes, in the sense of conventional UX and design it is definitely not the best. But Amazon must either not care or else huge analysis and many consultant hours show that the strength of something easily recognizable is better than an updated design and user experience. They have the money to change it, so when Amazon looks the same as ever it must be a deliberate choice. Besides, the strength may be in service design and artificial intelligence. Amazon has been light years ahead of everyone else in predicting what you what and what you have not checked out yet. We all know the story, where you are hunted by special offers on a product your received in the mail weeks ago – and it is relevant, but the alternative of nothing being personalized is not better. 20% of all searches on Amazon in the US are now Voice Search via an Echo-assistant. It is crystal clear indication that design and UX are reaching a new level where sound takes over screen and click. Some products demand a combination of screen and sound but that does not change that the user experience on the screen is dispensable if an order can be placed by voice.
As a digital consultancy our primary reason for existing is to develop technically complex solutions and consulting on a high strategic level and transform digital strategies to operational and tangible processes. When we are estimating Amazon’s readiness with our customers, the only thing making any logical and rational sense is an individually adjusted process as organization’s internal context is super decisive for how to evaluate the market potential. Our approach is tactical rational and focus besides on the market also on resources, infrastructure, and logistics. For most of our customers, the biggest challenge will be how to get started correctly. As soon as you have an account and is an active distributor at Amazon you can sell your goods. If you avoid beginner’s errors or unlucky situations putting you in the corner, you have a real chance of cultivate and optimize your business at Amazon on your own. The biggest challenges are systems, production, and storage. Look at Amazon like a grill bar that decides to get a drive-in after it opened. You are lacking a hole in the wall, changed logistics and patterns of movement in the kitchen to be able to sell your burgers through a new channel. Further, you need to optimize your receipt of orders and payment platform. All this needs to be handled through your existing e-commerce platform and ERP. At Kruso, we help our customers individually be creating a databased overview allowing them to make rational decisions about Amazon. What will it demand of the organization, data adjustment, changed business model, and generally how infrastructure in systems and processes will adjust to have a happy life with Amazon. This is relevant whether Amazon is something you are staying away from, something you use for uncultivated markets, something for the situations when your logistics cannot handle a business case or if you are unfolding your entire business on Amazon.