{"id":14812,"date":"2020-08-17T14:03:38","date_gmt":"2020-08-17T13:03:38","guid":{"rendered":"https:\/\/curamando.com\/amazon-is-coming-to-sweden-now-what\/"},"modified":"2025-02-10T14:15:18","modified_gmt":"2025-02-10T13:15:18","slug":"amazon-is-coming-to-sweden-now-what","status":"publish","type":"article","link":"https:\/\/curamando.com\/no\/blog\/amazon-is-coming-to-sweden-now-what\/","title":{"rendered":"Amazon is coming to Sweden \u2013 now what?"},"content":{"rendered":"

The advent of Amazon E-commerce in Sweden has been rumoured and pulled back multiple times but now it seems like everybody\u2019s fears (and hopes?) are finally becoming reality.<\/p>\n

Amazon is yet to reveal the official launch date of www.amazon.se, so apart from a warehouse in Eskilstuna and the fact that the company is recruiting a lot of people – what do we know about the Swedish Amazon launch?<\/p>\n

Alex Ootes, vice president for EU Expansion at Amazon, says the following:<\/p>\n

\u201cWe are optimistic that, by focusing on the things we believe customers will place the greatest emphasis on – low prices, a wide range and fast deliveries – we will eventually be able to win the trust of Swedish customers\u201d.<\/em><\/p>\n

Experts are debating left and right what the launch will mean for the Swedish business landscape – whether it\u2019ll be a \u201ckiss of death\u201d or if it will offer great opportunities for Swedish businesses.<\/p>\n

But now to the point – how will the business landscape be affected by the launch?<\/p>\n

 <\/p>\n

What is the scale and size of this event?<\/h2>\n

People in e-commerce have been terrified about the arrival of Amazon in Sweden. So, are they overreacting or possibly underreacting? What exactly is the scale of this super e-commerce event? In short: it changes everything.<\/p>\n

Since Amazon is a webshop, a subscription service, a logistics company, a streaming entertainment service, a digital marketing behemoth and an Internet infrastructure company, their entry into the market will change \u2013 like I said \u2013 everything.<\/p>\n

 <\/p>\n

What would Amazon\u2019s market share be?<\/h2>\n

If you want to estimate the potential size of Amazon\u2019s e-commerce market share in Sweden, you can look at how they are doing in other markets. Below is a selection of markets:<\/p>\n

\"\"<\/p>\n

In its home US market, Amazon has a market share that is close to 50%. The second-largest market share is in the UK, which is a country culturally close to the US. So they are outliers on the high end. Australia is also a bit of an outlier with a market share of only 3%. Let\u2019s exclude those three «outlier markets» and focus on a few other western markets similar to us. Here, Amazon has market shares between 14 and 28%. One could argue that it gets harder to capture a big part of the market the later you enter, which could possibly explain some of Amazon’s weak performance in the Australian market.<\/p>\n

With those numbers in mind, a ballpark estimation of Amazon’s potential market share is 15 – 30%<\/strong>, Probably closer to the lower end because of the late entry. It\u2019s also important to keep in mind that it will take some time to build that position.<\/p>\n

At this stage, anyone’s guess is as good as anybody else’s, but at least we can see from the comparison with other markets that we are probably looking at double-digit market share numbers, which will be a huge disruption for the Swedish e-commerce market.<\/p>\n

But you also need to consider that they will push the growth of the overall market. They will not just be taking market share from others, but they will be creating a market that grows at a faster pace. For some players, this will even be a win. If you are in a category or a segment where Amazon doesn\u2019t have a strong presence, but they are pushing the e-commerce habits of people, Amazon could possibly help grow your online sales.<\/p>\n

We don\u2019t expect many companies to fall into this category, so for most Swedish e-commerce companies, the game tightens.<\/p>\n

In order to understand what\u2019s happening, let\u2019s look at the US. Amazon have half of all sales in the world\u2019s largest B2C e-commerce market. That\u2019s insane! Furthermore, over the last couple of years, they have been capturing roughly 2\/3 of the growth in the B2C E-commerce market. So, from a position of a 50% market share, they are still growing faster than their competitors and capturing more market share every year. That\u2019s insaner<\/em>!<\/p>\n

 <\/p>\n

The Amazon effect<\/h2>\n

If you want to learn more about Amazon\u2019s effect on the e-commerce ecosystem, google \u201cthe Amazon effect\u201d and keep on reading.<\/p>\n

If we try to figure out the Amazon effect for Sweden, it will probably look something like this:<\/p>\n

\n

«The way that Amazon operates, including all the details around inventory, delivery times, prices, customer service and so on, will become the new norm.»<\/p>\n<\/blockquote>\n

This will be the new standard expectation, and if you\u2019re not competing in that league, you\u2019re out.<\/p>\n

There are many ways to try to describe what Amazon does and why it\u2019s been so successful.<\/p>\n

Jeff Bezos has put it like this:<\/p>\n

\u201cOur vision is to be the world\u2019s most customer-centric company, where customers can come to find anything they want to buy online.\u201d<\/em><\/p>\n

Amazon has revolutionised e-commerce by completely removing three crucial questions in the shopping experience:<\/p>\n

1. Where can I find it? Answer: Amazon
\n2. Who has the best price? Answer: Amazon
\n3. When can I have it? Answer: Tomorrow (Prime)<\/p>\n

With those three crucial concerns removed from the customers\u2019 consideration process, shoppers do what is the most obvious and easy thing to do – they go straight to Amazon and look nowhere else.<\/p>\n

If I try to summarise this into one sentence, I would put it like this:<\/p>\n

\n

«Amazon is the world’s most friction-free ecosystem.»<\/p>\n<\/blockquote>\n

For someone who doesn\u2019t live in a country where Amazon operates, this is a little bit hard to understand. In pre-Amazon Sweden, we have Googled<\/em> to find what we are looking for. But as Amazon arrives, Swedes will start to Amazon<\/em> to find what we are looking for.<\/p>\n

On average, 49% of products searches in the US market are initiated directly on Amazon and never go through Google or any other search engine or similar site. (statista.com<\/a>)<\/p>\n

\n

«49% of product searches are initiated directly on Amazon.»<\/p>\n<\/blockquote>\n

So, if you have been depending on driving product searches to your e-commerce site on Google, prepare for a future where at least half of that traffic disappears. But that\u2019s not the end of the story. Amazon has a much bigger appetite than that.<\/p>\n

 <\/p>\n

Amazon will eat your marketing lunch<\/h2>\n

The first thing that happens is that a large portion of product searches on Google disappears. This means that the competition for the remaining product searches goes up.<\/strong> It will become more expensive to advertise (SEM) and harder to reach top organic positions (SEO).<\/p>\n

That\u2019s because there is a new player in the SEM market. Someone who is really good at Google Ads. Someone that has a super-optimised site, high customer satisfaction, low prices, which in turn means lower bounce rates and as a result, higher quality scores.<\/p>\n

The name of this new player is of course Amazon. So, on the remaining product searches on Google, Amazon will outbid you and leave the remaining opportunities for Google traffic even smaller.<\/p>\n

In order to work around this, perhaps you\u2019re thinking you could double down on your SEO? Increase your efforts to reach that top position\u2026 The problem here is that Amazon are really strong at SEO too. They reach the nr 1 position for many products and categories. So, Amazon will start working their way up the organic search results, and before not too long you\u2019re going to be fighting them here too<\/strong>.<\/p>\n

Of course, there\u2019s always social media, where you might have an advantage with your fans and followers. This might be your strongest foothold, but don\u2019t think for a second that Amazon will not play the social media game too. More players in the same space = more competition here as well.<\/p>\n

In summary: All the tools that you have in your digital marketing toolbox – Amazon have them too. And they have the money to spend, because they gave a promise to their shareholders they were not going to optimise for profits – but for the growth of market share.<\/p>\n

\n

«All the tools that you have in your digital marketing toolbox – Amazon have them too»<\/p>\n<\/blockquote>\n

If you want to dig deeper into how Amazon\u2019s and Google\u2019s search results work together, I recommend this article<\/a> by Searchmetrics.<\/p>\n

Note: Since the pandemic started, Amazon has drastically cut back on their paid search efforts (probably because they don\u2019t have a problem with their sales but delivering on those sales). However, I wouldn\u2019t expect this to be the case when they launch in Sweden.<\/p>\n

\n

«Amazon is like the weather. You can have opinions about it, but in the end there’s very little that you can do about it.»<\/p>\n<\/blockquote>\n

<\/h3>\n

Bye-bye margins<\/h2>\n

Perhaps the most immediate effect that retailers and consumers will experience is Amazon\u2019s downward push on prices. Because of their scale, their efficiency and their promise to shareholders to deliver growth rather than profits, Amazon is incredibly competitive when it comes to price. Rest assured that this will be the case in Sweden too.<\/p>\n

If you want to have an idea of where it could end up, these are some numbers from Amazon\u2019s launch Australia in 2017. The numbers show the impact on prices in four online categories from December 2017 to February 2018 (Morgan Stanley research).<\/p>\n

\"\"<\/p>\n

<\/h3>\n

The Amazon double squeeze<\/h2>\n

We have concluded that there will be increased competition and rising prices in online advertising. There will also be a downward push in prices and margins in many categories. This is what I call the Amazon double squeeze<\/em>. Existing online retailers are likely to experience rising marketing cost and shrinking margins at the same time.<\/p>\n

\"\"<\/p>\n

This effect can be devastating for some retailers, as it rips away the opportunity to stay profitable. Let\u2019s have a look at some examples.<\/p>\n

Let\u2019s say that you have an average cost per click for paid advertising of 1 krona per click. Then let\u2019s assume you have a 2% average conversion rate on your website. This means that your customer acquisition cost (CAC) is 50 kronor.<\/p>\n

On the income side: say that your product price is 200 kronor and your direct cost for that product is 120 kronor. This leaves you with an 80 kronor direct margin on this product. If we, for the sake of simplicity, ignore retention and repeat purchases for now, you will have a direct profit of 30 kronor on the first purchase of this customer.<\/p>\n

\"\"<\/p>\n

As Amazon enters the market, two things will happen: Cost per click will increase and you need to adjust the product price down.<\/p>\n

In this example, I\u2019m guessing that the cost per click will double and that you will have the same conversion rate. You also need to take a 10% hit on your product price. Then your new profit equation becomes:<\/p>\n

\"\"<\/p>\n

Doesn\u2019t look too great, does it? There are ways of wrestling yourself out of the double squeeze \u2013 this is the Amazon opportunity. But you will need to be proactive to make this happen.<\/p>\n

<\/h3>\n

The Amazon opportunity<\/h2>\n

I agree that my predictions so far might seem grim for Swedish e-tailers, but I believe it\u2019s important to capture and relay a truthful picture even if it\u2019s not all that rosy.<\/p>\n

The rosy part, however, is that Amazon definitely brings opportunities as well.<\/p>\n

So far, we haven\u2019t touched on the subject of Amazon being a marketplace and that Amazon is an incredibly powerful sales channel for those who can master it. Even if you see decreasing sales via your traditional digital channels, there is now a new \u2013 large and rapidly growing \u2013 channel. For those who can get on this new train quickly, there is a tremendous opportunity.<\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"open","ping_status":"open","template":"","categories":[32],"tags":[],"class_list":["post-14812","article","type-article","status-publish","hentry","category-business-operations-merchandising"],"acf":[],"_links":{"self":[{"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/article\/14812","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/article"}],"about":[{"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/types\/article"}],"author":[{"embeddable":true,"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/comments?post=14812"}],"version-history":[{"count":3,"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/article\/14812\/revisions"}],"predecessor-version":[{"id":15499,"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/article\/14812\/revisions\/15499"}],"wp:attachment":[{"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/media?parent=14812"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/categories?post=14812"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/curamando.com\/no\/wp-json\/wp\/v2\/tags?post=14812"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}