Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

{audio:0:00:01} Philippe, can you just provide some context to when you first joined Amazon and how you were looking at building out a European infrastructure, to deliver goods to consumers?

{audio:0:00:13} It is interesting that you mentioned about when I started building the European infrastructure because when I started, it was not European at all. Amazon was opening country by country, in Europe and elsewhere, because Japan opened at the same time as France. Amazon was still a startup when I joined the company in 2000, and it was only five years old. It had just opened in Germany and the UK in 1998, by acquisitions of a very small internet companies; a bookseller in both cases; they were very tiny. In France, it was the first time, outside of the US, that Amazon decided to go and build everything, with the website and the team.

{audio:0:01:02} As I said, at that time, it was not a European approach; it was a country-by-country approach. Therefore, Germany and the UK were really working on their own and there was a team that came to help and recruit and build a team in France. The Europeanization just started in 2001, a year later, where Amazon then had three countries in Europe and decided that they would start to create an organization around that and thinking about how to grow the three countries, together.

{audio:0:01:36} That’s the way it started, at least for me, by just having three countries first and then grouping them and getting them to start working together.

{audio:0:01:48} So strategically, Amazon actually entered the UK, France and Germany differently?

{audio:0:02:00} Yes. As I said, in Germany and the UK, they bought and acquired a small company that was selling books on the internet, but they were very small. From that, they very quickly rebranded as Amazon and they extended from that. At least in the UK, there was one person from the older company who is still at Amazon now. They kept most of the people, at the time, and grew from there. In France, they looked to see if they could do the same, but there was no suitable candidate. So in France, they did what they had only done in the US before, which was build everything from scratch. The catalogue, the logistics team – I was hired as head of logistics at that time, for France – and all the merchandising team and everything else, were hired from scratch.

{audio:0:03:03} The strategy was different but based mostly on the fact that they had tried to do what they did in the UK and Germany and build on another company, but they didn’t find a suitable one, so they decided to build from scratch.

{audio:0:03:23} What was the first step of moving into France?

{audio:0:03:27} Back in 2000, Amazon was only selling books and media products, such as DVDs, CDs and VHS. They were the only products that, across the board, even in the US, that Amazon was selling. It was only in 2002 to 2003 that they started with electronics, particularly in the US. Basically, they started to hire people in those categories; people from the book industry and people from the music industry, in France, to build the merchandising and the cataloguing. That was the first step. They also employed people on the communication side. Very quickly, they hired the operations team, about three to six months later, to focus on the warehouse and the distribution network.

{audio:0:04:26} What is so difficult about building the front end and the language issues? Sometimes we see errors in Amazon, whether it’s Swedish or Dutch?

{audio:0:04:37} I think the language is definitely the most difficult thing. All the systems on search are the same, particularly at Amazon. There is not much difference between all the websites. They are run the same way and there is the same structure. They are all using the same systems, as well. That means all the backend catalogue, all the imaging processes and databases are the same. Obviously, the most difficult thing is to get the language right.

{audio:0:05:08} That is the reason Amazon has been very slow to expand. If you compare it to other websites in e-commerce, you have many which have been very quick to grow in many countries and Amazon has been very slow in doing that. Amazon wanted to have a local experience that was perfect. They didn’t want to have bad translations but wanted to have the real localization. In fact, that is the reason why you have so many languages that are not available on Amazon, because they want to get the perfect experience for the locals. That means it needs real language. The entire translation piece is a pretty heavy thing to do, for Amazon.

{audio:0:05:59} Because the backend catalogues are all integrated and global, in some cases, for Amazon?

{audio:0:06:05} Yes, for some of the products. It’s a good point. When you are particularly focused on media and cultural products, the catalogue is also country or language specific. Even country specific, because if you talk about the US and the UK, they both speak English, with small differences. But culturally, there is a big difference in literacy and stuff like that. You have to look at the cultural difference more than the language difference. Having those products, as well, is very important.

{audio:0:06:38} Of course, when we talk about electronics or those kind of things, that is more global and there are few differences with the products between Europe, the UK or the US.

{audio:0:06:55} Is that why they preferred to buy a business in Germany, or was that more about buying the infrastructure?

{audio:0:07:03} I think it was a little bit of both. There was, obviously, an advantage because, in both UK and Germany, they already had a fulfilment center and they had people working there; they also had a catalogue already. It’s a bit of everything that was already there – maybe not at the scale that Amazon wished to be – but that was part of the issue. It’s more looking for people who knew the product and had a certain level of operation. At that time, Amazon was not global in that they didn’t have the same system everywhere. Therefore, it was easier to have a warehouse already there, with some level of inventory. It was super easy for them and, after, they could convert that, very quickly, to the Amazon technology, in terms of the website or backend technology.

{audio:0:07:59} How did you approach that in France? I guess you had to build the catalogue in the language, product by product?

{audio:0:08:06} Absolutely. The first thing was hiring the team, hiring specialists in different product lines, coming from the book industry. Basically, they went to every publisher and started to build a catalogue, working with them, to absorb the catalogue as much as possible. I remember an anecdote from France where Amazon took the Amazon approach and, therefore, they wanted to be the place where you could get all available books. They went to every publisher in France and said, we are going to order one book of every title that you have printed. The publishers were not used to that. We bought one book of every single printed title, from every publisher, and we put them in the warehouse, to make sure that a customer could find a book if it was available. That was a way to start and to make sure that we had the right offer from scratch. Plus, obviously, all the titles that were no longer being printed and we worked with a distributor to get them, as well. That was one of the approaches we undertook in order to build the offer in France.

{audio:0:09:25} How long does it take to get the language and the front end ready for a country, like France?

{audio:0:09:33} It’s hard to say, generally. In France’s case, it took roughly 12 months from the beginning to the end, for Amazon to be created in France. From the first employee, hired in France, to the opening of the website, I think it was about 12 or 13 months. That was 20 years ago. Today, it would not happen like that. Amazon is much bigger. We’ve got a European structure in place and you have got a team that is working across Europe; at that time there was someone from the US managing directly. There was no real international team leader; there were a few people helping and managing, as a side project. Now you have a full organization and you don’t need to hire every single person in the organization to get it done, because there are many people in the organization who have the know-how and can do a lot of things. Therefore, before even hiring your first person in the country, you can start and you can add some local people on the way and so it will be much quicker than it was in the early days. Technology has helped a lot, as well.

{audio:0:10:55} Is it really the language and the front end that is the limiting factor or the barrier to entering into some countries, such as the Netherlands or the Nordics?

{audio:0:11:06} It’s a big piece. There are two pieces, basically. There is this piece, which is front end, catalogue and product, that is tied to the country. The second part is the operations and the logistics. Those are the two things that you need to take care of. It has always been like that and it is still the case and I do believe that is still the case with Amazon, as well. It is adding and making sure that you can offer, which doesn’t mean that you necessarily have to have the infrastructure in the country; you have the capability to offer the expected services to the customers of the country you are going to enter into. That is a slight difference.

{audio:0:11:56} For many years, Amazon thought that we needed to do that. Germany, France, Japan and the UK has been done like that and we need to set everything up in the country. Back in 2000, Amazon thought they would continue to do it like that, but it was very expensive to do it, obviously. You build a website, with a full team for merchandising and a full operations team, dedicated to the business. Unfortunately, the size of the countries in Europe were getting smaller and smaller. As soon as you’ve done the three big ones, you go to a different size level, so you were doing it for fewer and fewer people every time.

{audio:0:12:33} Where Amazon started and where Europe started to make sense, as an organization, for Amazon, we started to think about how we can leverage all the existing teams, in the three countries, to help with these two aspects. Basically, when Amazon created its European headquarters, it was where we started, for example, to have people who were coming from different countries, such as Spain and Italy, who were able to manage other languages. We had knowledge of the UK, French and German business, and as well as operations, we started to think about serving a country, with a good level of service, from another country, from an existing warehouse somewhere else.

{audio:0:13:21} It is still unique to have both. When Amazon was small, at an early stage, the only way was to do everything for the country and now it is more the case of, use what you have and do it right for a country. Ultimately, there will, potentially, be an infrastructure in the country. If you want to have next day delivery or same day delivery, for example, you would have to put something in place.

{audio:0:13:47} So you could serve the Netherlands from Germany or the Nordics from Germany?

{audio:0:13:52} Absolutely. That is the current situation.

{audio:0:13:56} You could use the backend or the operations from Germany, to serve the Nordics, but you need a Swedish language front end?

{audio:0:14:13} Was that the challenge? You could still serve them from Germany, but because you haven’t got the language correct, it’s going to be harder to actually kick start the growth?

{audio:0:14:24} That’s true and it’s where many Amazon teams have worked a lot on the translations of the website and making sure, as far as possible, that we are able, firstly, to translate the infrastructure of the website and the catalogue, as well. If you think back, Amazon worked hard to even be able to offer some of their website, in another language. For example, if you go to the amazon.de website, which is the German one, you can switch to English. I don’t speak German, but I can go onto the amazon.de website, select my language and you have English as an option, and the entire website becomes English, except the catalogue, which remains in German. But the names of the categories and all the banners and details about your account are switched to English.

{audio:0:15:21} Amazon uses this technology in the Netherlands. The Netherlands has been, basically, created by using a huge part of the offers from other countries, but they just created a translation of one of the websites into Dutch.

{audio:0:15:40} When you look at the market share, obviously, the big three countries, the UK, Germany, France, Amazon is the leader, with 25% to 30% of e-commerce. But in the Nordics, Belgium, the Netherlands, where they haven’t got the infrastructure or are maybe a bit later in offering a native language website, they obviously have a much smaller market share. Why do you think that is?

{audio:0:16:01} If we take the Netherlands and the Nordics, which are a great example, I think, in the Nordics, 90% or 95% of the population speak English, as well as their local language, but even in those countries, being able to do it in their own language is an advantage. Also, being able to tailor the offer a little is also a big advantage, when you are able to select products. Any translation becomes less and less relevant and cultural products become less relevant so it’s very important to tailor the culture as much as you can. Even when you talk about the day-to-day products, the consumable products, I don’t think Swedish or English or French use the same kind of washing powder. Those kind of products – which I won’t call cultural – which are sold more in one type of country than another, you need to adjust for that. When you go through these products, even if you think there is no link to the language, you still have the cultural aspect and tailoring your offer will help. Therefore, if you use the right language, for the right product, you already will have much more advanced penetration to encourage people to come.

{audio:0:17:41} As I said, everywhere in the world, Amazon is recognized because it’s fast and reliable and, obviously, you get that when you are in country and you can sell products very quickly, with a next day service; even same day now, in some cases. All those services are a big advantage, making people come to Amazon. Free delivery helps, as well. All these things make people come to Amazon because it’s free, you get a huge selection which matches your need and you get it fast.

{audio:0:18:14} There are more issues when the selection doesn’t match your need quite as well because it is not your country’s selection or your language; when it’s going fast, but not necessarily very fast, and it takes two or three days to get to you, because you know that it’s coming from abroad and, on top of that, potentially, you pay because most of the time you pay for shipping from other countries. There is no free shipping of products to other countries from the UK. Those elements impact the power of Amazon where a local could compete. It is the reason why the ultimate experience of Amazon is to have all that, including the Prime program. To offer Prime, you really need to have the logistics – not necessarily inside the country – but fine-tuned, to serve the country. It’s not an international shipment that you can manage from anywhere else in your network, outside of the country.

{audio:0:19:17} I believe it is the reason why, today, the lower penetration or success of Amazon in those countries is really related to those elements, which are just because you don’t have the localized experience of everything, such as catalogue, website and operations and delivery services.

{audio:0:19:38} How is the German warehouse network structured?

{audio:0:19:43} Today, I don’t even know the number. I think there are maybe 20 warehouses today, serving Germany. That question was very relevant 20 years, even if there was only one warehouse, because it was country by country. Nowadays, if you talk about Germany you should think about the fact that all the warehouses in Europe are serving Germany. Many of them are in Germany and most of the products that have been sold in Germany are coming from German warehouses. Some of them are Polish, as well. Six or seven years ago, we had a few warehouses put in Poland, just over the border, to sell to Germany, in places where there was a high availability of people and space. Any product in France is available to Germany, as well. The idea of the product supply chain is to put the product closer but, by definition, even a UK product is available for a German customer, via the German website. They don’t have to go onto the amazon.co.uk site.

{audio:0:20:57} This is the reason why the structure is mainly a constellation of warehouses which is, I would say, 15 to 20 today. The number is moving fast because, every year, Amazon adds warehouses. They are spread across the country, in Berlin, Munich, Leipzig, Frankfurt and in the Ruhr area, there are two or three now. This is to serve the population locally, as much as possible, but with the capability of also receiving products from Italy or Spain, if they product is available over there and it is the only one available for the network.

{audio:0:21:33} Just on that point on Poland, you had warehouses in Poland, but did you not focus on the Polish market as much, because you were growing so fast in Germany?

{audio:0:21:41} Yes; the German warehouses were originally mostly built to help to fulfil Germany. There is no localization and no website for Poland and all of the products that were in the Polish warehouse were mostly coming from Germany, as well, because they were German products, as such. They could come from everywhere, for Germany customers.

{audio:0:22:14} It is interesting how there is still room for local players to really own their own market if, as you said, they have a full, integrated offering from the catalogue, local language, merchandising and logistics.

{audio:0:22:32} Yes. I think a perfect example is Allegro, illustrating what I have been saying. Amazon decided not to make Poland a priority, four, five or six years ago, despite already having some facilities there. The localization, the language and so on, was not a priority and they left it to a local company. Allegro has been very successful and is the leader in e-commerce, in Poland and they are making a great business because they are dedicated to Poland and are only focused on the Polish market. They run the entire business like that with a good service and the right products.

{audio:0:23:27} In Poland, for example, how could Amazon now compete with Allegro?

{audio:0:23:39} They would need to create a Polish website; they would need to localize their offer to Poland and adjust the prices, potentially. They need to have the right products and compete as they do in every market. They will align their pricing to what the market prices are, so that they will become competitive locally. They will add some infrastructure to be more competitive in terms of service. Today, there are warehouses but they are mainly in the west of Poland, close to the border. They will spread a little bit more; one in Warsaw, for example, which is an obvious place to have one, in order to sell more efficiently. After that, they will be able to start competing with Allegro a little bit better than they do now.

{audio:0:24:37} How does the delivery time change when you actually own your own warehouse, in the country?

{audio:0:24:45} I wouldn’t necessarily say own; I would just say when you have it, whether it is yours or via a third-party logistics. To have or own a facility or fulfilment center in the country will change a lot of things, in terms of speed, mostly. If I go, to a larger extent, into a country, you will also have an advantage in cost. It is not the case for Amazon because it has already the facility in Poland but imagine I am a German e-commerce company and I want to start selling products from Germany. Fortunately, you start from a higher end of logistics because Germany is much cheaper than Poland so you have an advantage in being localized, in that case.

{audio:0:25:41} I would say the bigger advantage is being able, first, to get product, as well. There are some companies that will only deliver in their own country and won’t go internationally. Therefore, it’s easier to capture a wider range of sellers or vendors, to get product and to get good offers. Of course, it’s much cheaper and quicker to deliver to your customer when you are in country as opposed to being out of the country.

{audio:0:26:15} On the question of owning, that’s a conviction question. If you are, like Amazon, absolutely convinced that your capability of fulfilling is a competitive advantage you do as much as possible yourself. Amazon do also do 3PL but 80% to 85% of what is being sold by Amazon is coming from Amazon fulfilment centers. If you do less, you may decide to subcontract and give it to the third-party logistics provider.

{audio:0:26:50} Taking the Netherlands as an example, if I am a consumer in Holland and I am buying a product, typically, would the product be shipped from a German warehouse and then to a Netherlands facility or logistics 3PL?

{audio:0:27:05} We use the carriers, basically. If you look at the map, there are many warehouse facilities close to the Netherlands border, such as Dortmund. I’m sure that most of the products for the Netherlands are stored there, today. Yes, you inject them into the local network for delivery only. There is no additional facility. Frankly, from Dortmund, you are absolutely capable of doing next day delivery, by having your inventory in Dortmund or the Ruhr area, to deliver in the Netherlands. You use the last mile facility of your carrier in country. Historically, I know that Amazon worked with TNT in the Netherlands which is the postal service in the Netherlands and a huge carrier there. They inject directly into TNT, into the hub, which is maybe no more that 100km away from the warehouse, which is a decent distance from a warehouse and an injection point.

{audio:0:28:19} Would the Nordics be the same from Germany?

{audio:0:28:23} The Nordics is really the same, but it’s a little bit further. Obviously, when you talk about Denmark, it’s okay from Hamburg, for example; you can get to Denmark very quickly. When you start to talk about Norway or Sweden it’s a little bit more challenging and depends on the cities. It’s a little bit further but it’s absolutely doable. I believe that Amazon is doing it, for now, but I believe that they will go quicker to build something in the Nordics than in the Netherlands. The Netherlands is really close and there is no sea to cross. It’s no more difficult to do Dortmund-Amsterdam than doing Dortmund-Frankfurt. For the Nordics, except for Denmark, particularly Copenhagen, which is very close, it is becoming a little bit more difficult.

{audio:0:29:23} There is less incentive to own warehouse in the Netherlands versus the Nordics, because of the distance?

{audio:0:29:28} I think so. I believe that what will drive the decision, as well, is the size of the business and the size of the sales. Don’t forget that Amazon still grows quite fast. When you look at all the results, the country by country is different but still pretty much aligned on this growth. Pre-Covid and post-Covid, by the way, it’s the same, with acceleration post-Covid. Basically, Amazon still needs to add warehouses. The nice thing is that when you are the size of needing a warehouse to go to the Netherlands, as a business, you may decide to build your next one as an extension of your network, in the Netherlands.

{audio:0:30:15} It’s a combination of the two. There is the reach of the customer you can get, as well as the size. To come back to your question on Germany, they are spread all over Germany. They are also spread all over the UK. There are warehouses in Scotland, Wales and all along the M1 and the London area. Germany is the same where you have got all of the main cities covered. France has also started to spread across the central spine; you’ve got the south, the north, the Paris area and the center. The network is spreading out. At one point, it will make sense to have one in the Netherlands if the business is very big as there is still a good mix of internet penetration and GDP per inhabitant. I’m sure that will be a place where you would put one.

{audio:0:31:10} In terms of moving into the Nordics, I think they are building a warehouse in the center of Sweden so that would be able to ship product into there and serve the Nordics?

{audio:0:31:18} Absolutely. It would be quicker for Norway, particularly. And for Sweden, as well. When you are in Copenhagen, it’s very quick to get there but if you want to go a little bit further it is a long country, with not many people, so you would have to go somewhere in the middle of Sweden.

{audio:0:31:47} Do you materially reduce your shipping costs?

{audio:0:31:50} Indeed you do. You are spending a little bit on inventories. In order to mitigate or reduce the risk that you are taking on inventory, on duplicating an inventory which is going to be mostly dedicated to the place, even if you can still ship it elsewhere, it is a higher cost, but you invest a little bit in inventory. I’m not familiar with the pricing of land in those countries but I believe it will be very close or similar to Germany. But you are cutting miles and distance. When you cut miles and distance, you cut speed, naturally, but you also cut cost. Particularly in the last mile delivery, it matters a lot, even if it is just a small parcel. In that case, when they decide to do that, they will invest a bit in inventory but they reduce their last mile delivery costs.

{audio:0:33:07} Do they always own the last mile when they look to enter?

{audio:0:33:10} Not necessarily. They can still work with local partners. It has worked like that for many years. You just reduce your injection point and, therefore, you cut lines per hour in that case. It’s not the last mile but you are going to cut the lines per hour. That will enable you to save time. Today, you have a full truck, going from Hamburg, moving to one of the points of the hub and it’s going to take seven or eight hours just to get there. You cut this eight hours and eight hours is a lot when you want to do next day delivery. I’m not talking about same day but for next day, that is already a lot of time cut down and the salary of this guy driving up will also be taken away, ultimately; that’s where you save.

{audio:0:33:58} After that, what is also important is that you can be more fine-tuned, doing more injection which will be getting to the network of the carrier quicker, as well.

{audio:0:34:12} Let’s just take the Nordics again. If they are shipping from Germany to the Nordics, do they only serve certain retailers that would sell Amazon their inventory, to store it in their warehouse and then ship it, rather than allow the third-party marketplace to serve the region?

{audio:0:34:27} They do both. For most of the countries in Europe, it’s both. They do what they call a retail offer which is exactly that. You buy from some vendors; you store in your warehouse and you will ship when the customer orders. But they always, very quickly, add the marketplace part which allows sellers, locally, in that case, to sell through the platform and to ship to the customer directly. In that case, Amazon won’t buy the inventory, up to the point that they introduce, very quickly, the FBA program, which is the seller, selling his product, but giving it to Amazon to fulfill. But to have an FBA program, you need to have a warehouse.

{audio:0:35:13} You cannot do an FBA without a warehouse because that’s the purpose. You sell it and you sell your logistics. You can still sell shipping but the full FBA experience will definitely have the warehouse. Therefore, it could also be a decision incentive to have a warehouse, if you want to have an FBA program to the seller and, in that case, increasing your attraction, as a marketplace.

{audio:0:35:49} You can’t ship your own products from Nordics to Germany, to then ship back to the Nordics, on FBA, so you actually need a warehouse?

{audio:0:35:59} You can; there is nothing preventing you from doing that. Thankfully, in Europe, there is nothing. But it is not economical. For example, when you are an FBA seller, you decide where you want to sell. When you subscribe as a seller on Amazon Marketplace, in France or an FBA seller, when you want to give the inventory, you tell Amazon where you want Amazon to offer and ship your product. You may say, I just want it to be in France and your costs are associated with that. You might say, I want my product to be available EU wide and someone in Germany could buy my French product, which is stored in France and, in that case, you will be charged, when it happens, more logistic costs to ship the product, but you can do it. It’s a choice that you have to make as a vendor on the Amazon Marketplace.

{audio:0:36:59} Obviously, that would be reflected in the price of your product?

{audio:0:37:02} Not the price of your product but the price of the services you pay to Amazon. If you are a pure seller, I believe there are some legal constraints, potentially, of selling between countries, that you have to acknowledge you will take care of. But the price is still yours. The price is your price and if you are an FBA seller then yes, in that case, it will be reflected because you will have costs in selling from France to Germany. If you are quite big and you have quite a good inventory, you can even decide to tell Amazon that you want to sell in these three countries and please put my inventory in those three countries. You have to have sufficient inventory but Amazon could get your inventory and split it into three different parts, in three countries, in order to sell in each country, even if you are a French seller, for example.

{audio:0:38:02} What is the uptick or growth that you see when you actually start offering FBA from a warehouse, in the country? Is it a material change in the value proposition?

{audio:0:38:12} Yes, because you benefit – particularly in the current, existing countries, the ones that have been developed – from the Prime program. That is the massive benefit. Your next day, for free, for customers, is a huge benefit from the customer’s standpoint. It has really been demonstrated and you can find a lot of testimonials about that, on the web, from vendors who say, we are doing our own logistics and, obviously, on Amazon, when the people were ordering, they knew that it was going to take two to three days, whether or not you decide to put it as a free shipping, as a vendor or not. All of a sudden, you give it to Amazon and you enter exactly with an Amazon-like product, which means it is the service of Amazon; you’re next day, for free if you are Prime. That makes a huge difference in conversion for a vendor, if their logistics is not optimal.

{audio:0:39:14} If, tomorrow, you are vendor already somewhat in a country that has very efficient logistics, because you have your own website, because you already have that set up and you provide free shipping, that will not bring much. But it will still add a little bit because you are able to propose a fast a deliver as a seller. You will need a lot of time to prove it’s right before Amazon will allow you to advertise next day delivery, as a seller. Secondly, from the customer’s point of view, people still prefer to receive products from Amazon. They trust the logistics because it has been a strong set up in the company, for many years. When it comes from Amazon, even if it’s a seller product, they trust it much more. They know that it is going to be from Amazon, in terms of speed of delivery and quality. When it comes from a vendor, even if there are very good vendors, unfortunately, the range is wide and, sometimes, there are people that take more time and you have to change your product and the experience is much less satisfactory.

{audio:0:40:28} Do you always roll out FBA and Prime at the same time, in new countries?

{audio:0:40:45} When Prime does exist in a country, it usually comes before FBA, and FBA automatically benefits from Prime. In most of the countries, Prime does arrive before FBA but now, I would say, they arrive at more or less the same time. It is disconnected; it is two different processes. Amazon tries to launch new countries with everything, as much as possible. Historically, Prime came one to two years before FBA, in most places. This was mainly because Prime was a product of focus and FBA was a product that was started later, at Amazon. But for FBA, you get the Prime service automatically.

{audio:0:41:37} If I am a Prime customer, in the Netherlands, but the FBA is not attractive in that region, then it’s not going to be as attractive for the Prime, as well?

{audio:0:41:46} Correct. If there is no FBA services, of course, you will not benefit from it in your Prime products. It is advertised, within the Prime, that you get FBA, basically. FBA is very transparent for the customer. We just show that it is not Amazon selling because that is a legal requirement. It is very important, legally, to know who the seller of record is. But apart from that, we want to position it as if there is no difference. When a customer buys a product, he doesn’t really care whether it’s an Amazon product or a seller product, because it will be the same experience for the customer.

{audio:0:42:36} What is the biggest challenge in rolling out FBA, in a new country or region like the Nordics, for example?

{audio:0:42:41} You just need to have the right logistics. You need to have your own logistics to do FBA. You need to have logistics that work. That’s it.

{audio:0:42:58} Is seems less attractive, though, for Amazon if you’ve got an Allegro in Poland or another company in the Nordics that is an incumbent? Is it less attractive for Amazon when they go in there, if there is already a local player?

{audio:0:43:16} Of course; I’m sure it is. If I take Poland as an example. Allegro’s model is mostly a 3P model; it’s not a retail model. Therefore, they have captured great offers, a great customer base and a great seller base. Now, as Amazon arrive later, it is going to have to try to capture some of them which could be possible because the seller could be on both platforms, with no issue. Obviously, the FBA could make a difference because Allegro does not have an FBA program today and, therefore, that could make a difference with Amazon coming in and offering the logistics services on top of the platform, the marketplace. But, for sure, it would be more difficult for Amazon because they are going to have to get the rates for the marketplace fee correct, which is the art of this business. They also have to try to convince seller to at least move to the Amazon platform as well as being on Allegro or, move to the Amazon platform. That will depend on how the seller feels.

{audio:0:44:29} The good point is that there is no exclusivity and, therefore, as long as there is no FBA involved, I don’t see any issue for a seller saying, all my offers that I put on Allegro, I’m going to put on Amazon, as well. Amazon is a huge platform anyhow, already known in Poland, so they could try. As long as there is no FBA involved at their own place, therefore, they can send the order via Allegro or Amazon, without any issue.

{audio:0:45:06} The FBA becomes a very interesting point then. If I’m a seller and I’m in the Nordics or I sell, in Poland, on Allegro and I can go on Amazon now and it can be available in Germany, it’s an interesting situation?

{audio:0:45:21} That’s also true. The size and reach of Amazon, overall, could be attractive to some of the sellers, obviously, because Allegro is Poland only. If you start working with Amazon, you get more opportunities.

{audio:0:45:44} What is the FBA offer like for the Netherlands? It seems Amazon has a pretty low market share there?

{audio:0:45:52} To be honest, I don’t know. I don’t even know if they do offer FBA for the Netherlands sellers. Of course, if you are German and you decide to sell in the Netherlands and use the Dutch website and platform to be sold in the Netherlands, that doesn’t change anything for you.

{audio:0:46:19} Because they haven’t got the warehouse in the Netherlands?

{audio:0:46:21} Yes. Today, they may offer FBA for some sellers because the distance is so short between the Netherlands and Germany, they are both EU and there are no constraints in moving goods between the two countries. I’m sure, if you are a seller in the Netherlands, you could maybe subscribe as an FBA vendor on the Netherlands website and send your product across the border, which is easy to do, to be stored in the Dortmund warehouse, for example. I would need to check; I don’t know if that’s the case. At least logistically, it doesn’t strike me as if it would be too difficult. The distances are very short and it would not make a big difference to the cost. Therefore, the offer could be doable, without any issues.

{audio:0:47:12} If FBA is so important, why don’t Amazon move into most countries, more aggressively?

{audio:0:47:21} Why would you relate that to FBA, particularly?

{audio:0:47:27} I’m just thinking about from the vendors’ perspective.

{audio:0:47:30} I believe it’s a matter of priorities in the projects that they have to do.

{audio:0:47:44} I remember, back in the beginning, 2002, 2003, my early time at Amazon, there was a lot of press about Amazon and I think, at that time, we were in about five countries; three in Europe, Japan and the US. In 2003, five, six, seven years after the creation of Amazon, Amazon was in eight countries, officially, with a website and everything like that. We were compared to eBay, at that time. eBay was in 120 countries or something like that. It was an ongoing discussion in the press as to why Amazon was so slow; eBay uses the internet and the internet is global; why isn’t Amazon going into countries faster where other companies have been super-fast and not, obviously, establishing a presence in those countries.

{audio:0:48:51} That’s the way Amazon has done it since the beginning. Everyone in the world could order on amazon.com, by definition. Therefore saying, if people really want to buy from us, they can. When we get into a country, we really want to get it right; we want to be localized in many aspects, including the service. All those things that we discussed at the beginning. Therefore, they decide to do it bit by bit, building slowly. Looking back, 25 years later, Amazon is still not in many countries and they have lost a lot of opportunity, such as to Allegro in Poland and we can speak about, maybe, China and Indian, where Amazon has been but where we see the competition with Alibaba and Instakart is big. We can talk about Korea where Coupang is doing well. You can absolutely say, Amazon is not supporting that country which is maybe the case but, on the other hand, you could look at what Amazon has achieved, overall, globally, in those few countries and could say, that is already a big piece.

{audio:0:50:14} Will there be 200 billion more in that? Maybe, but maybe not, because maybe they will have sacrificed their extension to the countries where they have really become the company of e-commerce, where there are no real competitors, such as the US. Amazon is at least managing its priorities and already has growth which is unbelievable, over the past 25 years. Would they look for more, with higher risk and maybe challenging their basic business? I don’t know.

{audio:0:51:02} Do you think there is any reason why Amazon couldn’t become a leader in countries like the Netherlands, Nordics or Poland?

Amazon vs CDON, Allegro, & Bol.com

How Amazon built out the warehouse infrastructure in France, Germany, UK and Poland

Amazon vs CDON, Allegro, & Bol.com

Former VP, Amazon Logistics Europe

inpractise.com/articles/amazn-3p-marketplaces-europe

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Philippe Hemard

Former VP, Amazon Logistics Europe

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Amazon vs CDON, Allegro, & Bol.com(January 28, 2021)

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