Amazon is expanding to the Nordics. What pros and cons can you as a Retail player expect when selling your products through Amazon?
We cried wolf and as you know, it has now been confirmed, the wolf will arrive in Sweden and the Nordics. According to a press release from Amazon on August 4, a warehouse will open in Eskilstuna and a Swedish site will be launched.
Why is there no way of getting around Amazon? Well, it really goes without saying, but please bear with us. When Amazon entered the German and British markets, they quickly captured a very large share of the consumer markets. In Germany, protests regarding conditions for workers have caused some controversy over the years, but the fact is that more than a quarter of e-commerce sales in Germany are generated through Amazon.1 In the UK, Amazon has about a third of the market.
But is Amazon really a wolf? Or is Amazon an albatross that spreads its wings and lets you as a retailer fly out into the world reaching new markets and customers? Could Amazon be an opportunity? To be or not to be, on Amazon, that is the question!
Amazon's impact among consumers in the United States is so powerful that more than half of all product searches start here. Therefore, Amazon is challenging not only brands, pure players, and traditional retail chains, but also mighty Google3. One can conclude that Amazon is not just a store in the perception of consumer’s, rather the marketplace represents a gigantic supply of products regardless of category. If you want to drive sales through products, this is an extremely important aspect to consider.
If we zoom in further on the US market and look at consumers who shopped through Amazon at some point in the last two years, the figure will be even higher; about two-thirds of all consumers start their search on Amazon and only 20% in a search engine.4 As few as 4% of Amazon customers went directly to the brand's own store, and only 3% to another marketplace.5
The PRIME membership that includes "free shipping" and a packaged offering, that among other things includes streaming services is nothing but a success. The Amazon logistics network has challenged the shipping industry with speed and price pressure. PRIME reaches all walks of life, and it is fair to note that more than 70% of all Americans with an annual income of over $150,000 are members of PRIME.
Another aspect worth considering is the huge volume of third-party sellers that account for a larger share of sales than direct sales on Amazon. If a product becomes popular with consumers, third-party sellers will list the product on Amazon. The seller's choice of images, headers and product descriptions will represent your brand regardless of the quality of the product presentation. Consequently, your product will be found through a search on Amazon.
What do we make of all this? A reasonable conclusion is that brands need to take control of how their content is presented on Amazon. So which stance have brands around the world taken towards Amazon? A fair share has chosen to list its product offering on the marketplace. Amazon also offers registered brands the opportunity to set up their own store, providing greater control over the experience. Of course, there are brands that refuse to appear on Amazon, many of them luxurious brands such as Gucci and Louis Vuitton. 6 One reason is that they want to preserve the feeling of exclusivity that may be lost if the product is sold alongside cleaning products for bathrooms. Classic marketing knowledge teaches us that scarcity creates desire.
If you do not already have a successful international establishment, Amazon could represent a shortcut. In addition to reaching a larger audience, you can use Amazon's infrastructure and processes to reach international markets.
No matter what others may think about Amazon, you need to make up your own mind whether your products and services should be on Amazon's platform. They are here in the Nordics and cannot be ignored. Consider the pros- and cons and make your own analysis.
Is it possible to control your own destiny and retain control of the user experience when selling through Amazon? We are happy to help you deal with such issues, or if need support in your strategies. My colleagues and I are here for you. Please get in touch!