Will Amazon be successful in the Nordic countries?
How difficult will it be for Amazon to be as successful in the Nordic countries as it has been in the USA? When will this happen, where will it happen first and is the challenge the same in Sweden and Norway?
Let us first look at the probability of this happening. Breakit.se reported in October 2017 that Amazon was on its way to Sweden. The domain was finally transferred to Amazon Europe after several years of negotiations with the Swedish advertising agency Amazon AB. The price tag was presumed to be somewhere between SEK 1–5 million and has not been publicly announced. (This is slightly less than the SEK 47 million Daniel Arthursson received for icloud.com, but it is still a tidy sum.) Amazon has acquired land in Eskilstuna, Vesterås and Katrineholm, clearly signalling a type of logistics centre in the Swedish market.
Swedes in the driving seat
With clear signals that Amazon is about to enter Sweden, we can assume that the Swedish e-commerce market will be impacted. If we are to think about this negatively, this is “dreadful” news, concluded Pricerunner’s VD Nicklas Storåkre. “Then we are all dead. All e-traders will be slaves to Amazon, and there will be no place for us”, he continued. In October last year we were also able to read that “IKEA and Amazon are reportedly close to an historic deal in Sweden”. E-commerce currently constitutes only 5% of IKEA’s turnover and there are huge opportunities for its to sell its products via Amazon Marketplace. Jesper Brodin (CEO) stated that this type of partnership combined with new technology (AR) is IKEA 2.0 and “the next step” for IKEA. Thus, there is much to indicate that Amazon’s introduction to Norway will happen via Sweden. But what will Amazon actually encounter in the Norwegian market? Will it encounter the same challenges that many Swedish e-commerce solutions have also encountered in the Norwegian market?
What are the challenges in Norway?
Norway is an expensive country with high wage costs and a dispersed settlement pattern. Only the Oslo area could be regarded as being of significant size. Also, transporting goods is costly in Norway. We operate with as many as 10 goods zones in this long and narrow country. Transporting goods to the farthest islands in the north is not something that can be conducted cost-effectively overnight.
“Last mile delivery” has also always been a challenge here in Norway. Currently, it is not possible to deliver properly on a large scale. Prototypes are being worked on within the field of drop boxes and key access but it’s not going to happen right away. Mailboxes are of limited size and there is no simple and secure solution for leaving goods outside the front door. We could envisage a kind of “Amazon key” solution, but we are miles away from this, too. Read more about how Amazon addresses the “last mile delivery” challenge in the USA here: https://www.youtube.com/watch?v=l9EzRAYhH8Y
Friction-free trade
Amazon currently has a product in the USA that is called Prime. This gives the user exclusive access to the best products as well as free delivery. 2% of Amazon’s customers are apparently Prime members. “Prime Now: Get FREE 2-Hour Delivery on thousands of items”. But it gets even better: Amazon Dash makes online shopping even easier with physical buttons that you can install around the house and press when you need more of different products. If you’reout of beer, press the “Dash” button – and you’ve ordered more. “Set it, press it, get it”, says the ad. See how it works here:
https://www.amazon.com/Dash-Buttons/b?ie=UTF8&node=10667898011.
After all, Amazon’s business model is about removing friction from the buying process.
The key is cooperation
There is a lot to suggest that e-retailers and stores in Norway also regard Amazon as an imminent threat. Retailers have already faced challenges with online shopping before Amazon came onto the scene. A lack of ability and/or willingness to adjust at a store level does not engender the greatest hope for the future But is it possible to turn this into an opportunity? In recent years the oil industry has demonstrated an astonishing ability to adapt, thus making it far more effective within the existing framework conditions. It has cost a lot, but it is now much better equipped to meet the market.
We hope and believe the same could also apply to Amazon’s entry into Norway. We believe that this will make us more efficient and aware simply because of the threat that this represents. We will probably see collaboration and constellations that we have not previously seen in Norway.
Could we envisage Norwegian “giants” like Finn.no and komplett.no resisting and being able to defend the Norwegian market against Amazon? Based on their already huge platform, the opportunity to compete is there. Komplett is now inviting anyone with products to sell to use its platform. Anton Hagberg has described this as Komplett’s most ambitious project ever. Popular brands like Jernia, Spaceworld, Soundgarden, Platekompaniet, Elefun and Haugenbok.no have already jumped on the bandwagon. With an expressed ambition to land 200–300 partners by the end of the year, we could be looking at something sustainable here. “This platform will enable us to take on major international competitors”, stated Hagberg.
The future is coming, regardless
Margins will probably be very tight and many companies will go under. However, Norwegian e-commerce solutions should aim to gather around a couple of major platforms in the future. A major platform solution such as this could be based on a much greater volume of Norwegian customer data than what Amazon will be able to procure in the foreseeable future. If this is combined with an effective logistics network and, not least, a willingness to invest in new “convenience” technology for customers, we will be well advanced. If market forces produce one or more players who collaborate here in Norway, this will provide Amazon with competition – which is for the good of consumers. One thing remains clear. The ship is sailing, and those unwilling to invest will lose out.
