The arrival of Amazon in the Benelux is causing a landslide. Experts take a gloomy view: an immeasurable product range, very low prices and the cheap Prime membership are the ingredients of a deadly efficient ecosystem. What can local players do against that?
A double-edged sword
The timing could not have been better for Amazon’s Dutch webshop: it is starting up in full corona crisis, now that e-commerce turnover is growing strongly everywhere. Fierce competition with local players like Coolblue and bol.com seems inevitable: “mainly on price, but also on the product range: you can order literally anything at Amazon. The American giant is called the everything store for a reason”, says RetailDetail founder Jorg Snoeck. More than a hundred million items can already be bought on amazon.nl, almost five times as many as at bol.com. As a search engine for products, Amazon is already bigger than Google.
External sales partners supply half of that enormous selection: thousands of Dutch entrepreneurs are already selling on the platform, the newcomer reports in a press release. They count on additional sales opportunities, but in order to survive on Amazon, they must have a unique offer: “Amazon has all the data. They see which products are popular, and can then start selling the best-selling products directly“, Snoeck says, fearing Amazon is a double-edged sword.
A stimulus for e-commerce
Dutch Amazon expert Rishi Kartaram thinks it will be vital for local partners to distinguish themselves among the enormous number of suppliers on the platform. Amazon’s international network is a great asset, he states: suppliers come from countries such as Austria, Germany, Italy and the United Kingdom. They compete on price so that the web platform can guarantee lower prices than, for example, bol.com. This causes everyone’s margins to shrink.
Not everyone is afraid: according to Greet Dekocker, director of the Belgian sector association SafeShops.be, the arrival of Amazon in the Benelux could be a stimulus for the entire e-commerce industry. “In other countries, we have seen that the start of a new marketplace often has a positive effect on the sales of other webshops, because consumers adopt the habit of searching online. Many members also find that it can be an opportunity in itself to export via Amazon or other marketplaces.”
Predicting buying behaviour
Artificial intelligence is not an empty concept at Amazon: the company has an incredible wealth of customer data and invests billions in data analysis. As a result, they are able to predict purchasing behaviour. “Suppose you buy shampoo on their website. With a few simple questions and mouse clicks they know how your family is composed”, Kartaram says. “Of course they know how much shampoo you have bought, and from that data, they can calculate when your shampoo bottles will be about empty. You can be sure you will be bombarded with lots of promotional offers during that period.” Try to compete against that…
And then there is Amazon Prime: this service combines a competitively priced streaming service with all kinds of additional benefits such as fast and free delivery. According to Kartaram, it is a smart story: “Once you have such a subscription, you will be mostly ordering from Amazon as well: after all, you no longer pay shipping costs. I thought it would cost 5&bnsp;euros in combination with free delivery, but it is much worse: it is free for the first month and then 2.99&bnsp;euros a month.”
A deadly weapon
Perhaps this is Amazon’s deadliest weapon: the subscription service locks customers into the Internet giant’s ecosystem, as it were. Prime-members spend most of their budget at Amazon. “That is going to be the key to the market”, Snoeck agrees. Amazon.nl will shake up the e-commerce market in the Benelux; without a doubt: “Already this year they are going to be the number one, maybe two to three times larger than all the others.” In Wallonia, where bol.com and Coolblue are only now becoming active, Amazon France has been the undisputed market leader for quite some time.
A first important test will be Prime Day in July, Amazon’s version of Black Friday: 48 hours full of special offers and featured promotions, with a 30-day free Prime trial offer. This should give the company a substantial boost in the Benelux. By the real Black Friday, on 27 November, the giant will already have become a strong market leader. Other webshops will have to join the negative price spiral, which will evaporate margins and put further pressure on suppliers. Nice prospects…
Is ‘customer goodwill’ enough?
However, local competitors are not sitting still: bol.com has added fashion into its product range and lowered its commission for sales partners. A new campaign, that puts local partners in the spotlight, is currently running. Officially, these initiatives have nothing to do with the arrival of Amazon, but nobody believes that. Ahold Delhaize is not worried and points to the influential figures: bol.com has 10 million customers and 27,000 partners, and annual growth is around 30 %. However, the retail company keeps its lips sealed about the profit figures, if any.
Many observers do not understand why Ahold Delhaize has not integrated bol.com’s business more firmly into the strategy of its supermarket chains, which serve millions of customers every week. The shops function as collection points, but there is still a long way to go before there is a real, fully-fledged ecosystem. “The synergy is hard to find”, Snoeck confirms: “They remain islands. Albert Heijn and Delhaize are not yet able to work together, let alone integrate bol.com.”
Bol.com hopes to hold its own by focusing even more on proximity and local partnership: the brand can indeed count on strong local goodwill and high consumer confidence. Coolblue also relies on this ‘customer goodwill’, the sympathy of the local clientele. Both companies also provide a high level of service. But will that be enough? For Wehkamp, observers foresee the most significant problems: the company is not sufficiently distinctive and could be the first victim of the intensified competition.
What Amazon can’t do
Finally, the key question is what this further growth spurt for e-commerce can mean for the shopping streets, where vacancy rates are already breaking records. Is there a threat of further abandonment? A retail apocalypse in the Benelux? “The only advantage the shopping street still has is the personal contact with customers”, Snoeck believes. “Stores with no added value are filtered out. On assortment and price, you can not win against Amazon. You have to concentrate on ‘what Amazon can’t do‘: decentralize and put the human being at the centre. Build a relationship of trust with your customer base and keep the contact as pleasant as possible.”
That is also what Amazon watcher Natalie Berg says in her book ‘Amazon: the retailer who turns everything upside down’: “Amazon has weaknesses, too. They have taken the fun out of shopping; everything is purely functional and transactional with them. Amazon is about buying, not shopping. The webshop kills friction, but also experience. So focus on what Amazon cannot do: experience, curation, service, community, discovery, etc. There are opportunities. Start from your strengths: your stores and your people.”
