Amazon delivering on preparations to enter Sweden

Reuters recently reported that Amazon.com Inc is preparing to launch in Sweden. This will be its first move towards establishing a local presence in a Nordic country.

Swedish customers can already shop on Amazon through its websites in other European countries such as Germany, and get their purchases shipped to the country, but this often meant paying high delivery charges.

Alex Ootes, Vice President for EU Expansion at Amazon, said: “We 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.” Amazon has not released a date for the launch of the website.

Amazon is currently building a warehousing and distribution hub in Eskilstuna, Sweden and early estimates are that stocks will begin arriving towards the end of August or early September. Ootes said: “The next step is to introduce a complete retail offering in Sweden and that is what we plan to do now.”

The entry of Amazon into Sweden could be expected to present a challenge to local players. But Amazon will first have to overcome many challenges itself.

As Nigel Wright’s Group Executive Director, Lars Herrem, comments: “The Nordics is a complicated market. Logistically, it spans large distances across smaller populations than Amazon’s main markets and this will make it expensive to serve if they go for full national coverage. Amazon’s market entry may focus on population centres surrounding larger cities such as Stockholm which are receptive to ecommerce and operate mature markets. Amazon’s entry will undoubtably continue to accelerate online penetration which will potentially also benefit other ecommerce players."

Ecommerce is well established within most retail sectors in Sweden and there are several big players offering next day or even same day delivery at little or no cost in the larger cities. The COVID crisis has meant customers have increased their spend online and are familiar buying products this way, especially in certain segments such as beauty, home electronics and baby products. 

Amazon can present big opportunities for strong consumer brands and offers a way to internationalise.  For those retailers who are in the early phases of digitalisation and especially those who have not taken ecommerce seriously, they need to increase their pace because Amazon is likely to increase digitalisation. 

Commentators expect that market penetration for online shopping will increase in Sweden and fuel further growth for local ecommerce.

Amazon’s USPs in large markets are huge product breadth, competitive pricing and delivery time/reliability. Many local players in Sweden already deliver on the same day within cities, so Lars Herrem adds that he struggles to see how Amazon can deliver faster on one of its main key selling points.As for Amazon’s competitive (lower) pricing strategy, gross margin in the electronic categories is already squeezed. Lars Herrem asks: “How much more can be taken out? How long will Amazon accept loosing money – within the Nordics as well as most of its established markets?”

Employment laws and minimum salaries are significantly stronger in Sweden and across the Nordics compared to other European countries where Amazon is established.

Once established in Sweden, Amazon’s expansion can be expected to focus across the Nordics. Nigel Wright’s Country Manager for Norway, Jacob Ronne, comments: “If and when this happens, Amazon’s supply chain practices and transparency will be influential for tapping into Norwegian customers’ wallets. Many soon-to-be-competitors already have flexible logistics in place. Selective distribution is already a strategy for many premium brands and they can choose a strategy to circumnavigate Amazon.”

This aside, as Amazon enters the market, its local retailers and etailers will have to react, just as they had to adapt in the United States, Britain, Germany and France. Many have adopted successful strategies to meet the challenge from Amazon by repositioning to premium markets, improving their supply chains and logistics service, or extending brands that are not sold on Amazon.

Nordic ecommerce is about to enter a new stage in its evolution – an accelerated one.

Annual net sales of Amazon in selected leading markets from 2014 to 2019 (in billion U.S. Dollars)

Our Group Executive Director Lars Herrem also shared his thoughts by contributing to another article on the same topic by market specialist WakeupData. Click here to read the article.