When I moved back from France to Sweden 4 years ago, I had witnessed 7 years of unprecedented market shift in the French retail industry: Amazon had gone from an obscure e-commerce player to a market leader in several retail segments. At this time, my pitch to all the Nordic retailers was: “Amazon is coming soon, and you better get your e-business going!”. E-business in the Nordics was, and still is, quite poor, with just-average customer service, limited offerings and disorganized deliveries. Like a big retailer’s CEO put it: “if they came here, it would be a bloodbath”. But it has not happened yet…
So why is Amazon not throwing themselves at the economically-strong, technology-savvy, “always best-in-class” Nordic region? All decisions taken at Amazon are based on analytics and customer-centricity: there MUST be reasons for them not to act. Let’s analyze what it could be.
Low people density: Look at a map of Europe at night, you’ll see how low-populated the Nordic region is compared to the European continent, representing 20% of the area of Europe but only 4% of its population (excluding Russia). Huge area to cover for quite a limited revenue. Like in all other markets they invest in, Amazon Nordics would be dedicated to fulfilling its promise at all time for all customers, however spread they are. This is probably estimated to be too costly in the Nordics, even for them.
Fragmented languages and cultures: One unknown but huge part of Amazon’s business model is translating and localizing content to make it available for their customers in their own language. The Nordic population is not only fragmented geographically, it also includes a unique non-Indo-European language, Finnish. And even if Swedish, Norwegian and Danish are close, there are differences to be accounted for. So here again, huge cost for a very fragmented and limited population.
Unharmonized market conditions: the Nordic countries are often seen as a single market, but there are significant differences between them: Finland is in the EURO-area, but not Sweden, Denmark or Norway. Norway is not even part of the EU, which implies costly custom-processes that all the Nordic retailers have to take into account when working cross borders.
Protected and expensive workforce: Amazon logistics is still very much non-automatized. It must, as it offers customers a wide (read infinite) range of products, from small and light to large and heavy, from cheap to expensive. To reach a satisfying level of business, Amazon Nordics will not be able to specialize its logistics and will have to keep it manual. That means hiring low-paid, very flexible workforce to keep costs low and to manage the typical high-peaks and deep-lows e-business demand. This can be a big challenge in the Nordic countries, where unemployment is low, salaries are high and labor union are strong. Remembering the difficulties Toys ‘r Us had in the past in Sweden for not collaborating with labor unions (Swedish customers boycotted the company for years!) and the current discussion about how Foodora and Uber-eat is managing its workforce, this is a high-risk area even for a giant like Amazon.
Please note that I am writing about the Amazon Logistics / Amazon Prime offering. These are the capabilities that make the difference from a customer perspective. I am not referring to the IT firm Amazon Web Services which apparently has finally bought the amazon.se domain (let’s pretend this would have stopped them to come) and a piece of land lot in Eskilstuna (Sweden) to build IT-servers warehouses.
So why does it matter?
Either I am totally wrong (and in a way, I hope so) and Amazon is on its way to the Nordics. In this case we, as consumers, consultants and retail professionals, can only embrace this future and look forward to this challenging and wonderful time of increased pressure on the Nordic retail market.
Either they are not, and there is a place to take! A huge place. The place of the future number one in the Nordic Retail market.
There is one thing in common in all the markets where Amazon has had tremendous success, it’s the how they changed the customers’ view on what level of service could be expected from their retailers. Amazon wins by promising everything and in every possible way to their customers, and by delivering on promise. If Amazon is not coming to the Nordics, then there is a huge opportunity for the company with guts and vision to take this role, and put customers first.
Yes, the Nordic customers are one of the least demanding customers on the planet: they have low expectations and they will very rarely complain. Yes, in the Nordic culture, there is a sense that bad weather, deep snow, or other constraints always might affect your ability to deliver, and therefore there is a high level of acceptance for troubles or issues in the customer experience. But once you as a customer have tasted a perfect customer experience, you do not want to go back.
Look at a country like France and the very hard-to-satisfy French customers: Amazon (an American company!) managed to take over the nearest-to-French-heart cultural market, with books, music and movies, and nearly drove to bankruptcy one of the most beloved French retailers, FNAC. Even the publicly owned parcel-transportation monopoly ColiPoste is shaken to its foundation by such a powerful actor. And this only by showing to customers what great customer service is about.
Look at the successes of Zalando or Wish in the Nordics: even if they are still small-scale successes, they are proof that even Nordic customers will be “hooked” if you give them customer experiences they are not expecting and not used to.
So, what does it take?
Well, if you want to be number one, you must turn the traditional retail concepts upside-down:
Organize your whole company from the customer’s point-of-view, and not from a product or a profitability point-of-view: be “customer obsessed”. Your only goal is not to offer a product but to take over the relationship with the customer. Then everything will follow.
Offer an infinite assortment range: this is the only way to know what your customers really want, and then source it the most optimal way.
Make sure the only constraints you are putting on your logistic are to insure customer satisfaction: they are the only constraints worth paying for.
There is still a HUGE place to take on the Nordic Market.The question is who will have the guts and the vision to become the next Amazon or the next Alibaba in the Nordics.
If you want to know more about how to become the number 1 retailer in the Nordics, or if you are Amazon planning to open a business here, contact us at Centigo.