THE RISE OF AMAZON IN THE NORDICS – What will this mean for your business?

Amazon

Amazon has grown into a disproportionately powerful modern retail monopoly, and there are no signs of the e-commerce giant slowing down. Amazon’s most recent market entry into Sweden has raised active discussion on the possible impact the e-commerce giant will have on the Nordic retail landscape. The conversation is worth having since Amazon has a proven track record of disrupting the retail industry. So what does this possibly mean for your company? 

To get a better picture of Amazon’s power, let’s look at its position in the world’s largest B2C e-commerce market; the US. Amazon already dominates the US e-commerce market with a staggering market share of around 50 %. Amazon also accounts for roughly ⅔ of growth in the B2C e-commerce market, meaning they are continuously capturing more market share every year! A similar trend is visible in many EU countries, the UK and Japan. 

“Amazon could become the largest e-commerce player in the Nordics in the next five years.”

We can already see structural changes towards online shopping in the Nordics, with Covid-19 only accelerating this change. Based on a recent Boston Consulting Group study, there’s a possibility of Amazon capturing up to 5-10% of Nordic e-commerce market share in the next five years, which will make Amazon the largest e-commerce player in the Nordics. Time will only tell how large that number will grow to – when comparing to other markets. Most likely, it will be in the double-digits.

Given that Amazon might become the new norm of Nordic shopping sooner or later, the topic should be on every management team’s table. This significant power shift will tighten competition amongst retail and e-commerce companies, pushing down prices and eating away margins.

As a result, retail companies will have to re-evaluate their strategies to stay competitive. Since Amazon’s marketplace’s strengths lie within its endless product selection, low prices, and competitive delivery times, how will you ensure customers turn to your brick-and-mortar/online store instead of Amazon? 

It is also very probable that only the strongest brands can survive in the long run, especially if voice-search through Alexa becomes common globally, and its algorithm starts favoring Amazon’s private label brands. Many classic competitive strategies begin to lose effectiveness in a monopolistic platform, which can take over pretty much any industry overnight with its nigh bottomless cash-reserves and capability to take prolonged losses to drive past the competition.

Of course, the future is difficult to predict, so instead of speculating too much on what might happen, companies have to focus on staying competitive no matter what happens. Businesses have to continually work towards the future and be willing to experiment and transform. 

That being said, instead of fighting Amazon, why not consider joining them? Amazon is a powerful sales channel to add to your omnichannel strategy, as it offers numerous benefits:

  • Access to a large and active customer base
  • A fast and efficient logistics network 
  • A ready and easy-to-use sales platform 
  • Swift scaling opportunities internationally

Whichever road you decide to choose, it is essential to note that Amazon will very likely continue to be a formidable disrupting force in the next decade, which is why retail companies should be giving Amazon’s marketplace a-go. For those who can jump onto the Amazon train quickly and master the skill of selling on Amazon, the opportunities are endless. So are also, on the flip side, the possible downsides of not reacting early enough.

By: 

Mikael Bertus, Lead Creative

Rebecca Sutton, Growth hacker