Amazon vs Wayfair: EU Heavy & Bulky Market Challenges

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Why break them up in the first place? Why get into this chaotic organization? If you receive a pallet of paper, why not leave it as a pallet? If you have a single order for a box, just take it from the pallet. Why scatter the pallet all over the warehouse and put yourself in that situation?

That's not how chaotic storage works. At first glance, it doesn't make sense. You might think to store items as they arrive, but most things come in big boxes or pallets. Very few items arrive as single units. Typically, anything that comes in is taken apart and stored chaotically because Amazon is set up for B2C, mainly for end consumers. Sometimes small businesses buy, but their purchasing behavior isn't much different from consumers. Larger customers, like BMW or Siemens, might buy pallets or even truckloads. You need to be ready for that, and that's where capabilities come in. It's always a bit of a chicken and egg problem. If you start building those capabilities, especially with heavy and bulky items, it's expensive to store them if there's no demand. But if you don't have them in your selection, you might not get the demand. Amazon has ways to balance this, and we can dive deeper into how they do it. It's a big challenge.

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Why does having more local and different tastes make it challenging?

To serve the whole of Europe, you need a much broader selection to satisfy all the local tastes, unlike the US, where it's more uniform. There are still local differences in the US, like people in California might have different tastes than those in Kansas. From my experience, and from what we heard from our US colleagues, Europe has pronounced cultural differences between countries. Tastes in fashion, for example, vary significantly, like in Paris. There are many brands only in France and not in Germany. If you want to be on Amazon, you need to carry all of them. To build a player like Wayfair, you must ensure you have local brands or meet local styles. Styles differ significantly between Britain, Italy, the Nordics, and so on, making it harder.

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How did you guys think internally about home furniture regarding the 1P versus 3P mix? What would you decide to buy yourself from retailers at wholesale and sell them 1P versus not carrying the inventory and keeping it 3P?

If you want to store your item at Amazon's warehouses and use Fulfillment by Amazon (FBA), you'll pay additional fees. FBA fees aren't ideal for heavy, bulky items. I recently looked into this for a client in the chemical industry who wanted to sell 25-kilo bags of salt. Selling directly as a manufacturer on Amazon didn't make sense because FBA charges over €10 for one 25-kilo bag. Heavy, bulky items are a big issue here, which is why none of the sellers do it.

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