Amazon just launched in an unprepared Sweden

In case you didn’t know. Amazon just launched in Sweden. They took the shortcut and machine-translated product pages from Germany. Which resulted in many hilarious product titles. Most Swedes have already seen the funniest ones circulating on social media. It seems like Amazon didn’t come prepared.

The truth is rather that Sweden is unprepared.

Based on the comment sections on various platforms I sense that many people are confused about what Amazon really is. So let’s get that out of the way: Amazon is a marketplace, not an ecommerce. They allow other people/businesses to sell products via their platform. This is very important to understand.

This blog post is an attempt to explain what Amazon is and why their market entry will change Sweden forever. As you will learn, they don’t care if it will take a couple of years to get it up to speed. We will cover the following:

  • Amazon is a marketplace, not an ecommerce
  • Amazon compete on convenience, not price
  • Unfair advantage: no profits required
  • Bad translations, on purpose?
  • Will change how we deliver packages in Sweden (finally!)

Fulfillment by Amazon (FBA) in Sweden and the new underdogs

Sweden is crazy about online shopping and has been for many years. In the very beginning, there were mainly young people or small businesses who tried their luck.

These small players were considered underdogs that over time became very successful.

A perfect example of this are my friends Anton and Joel. They started an extremely niched ecommerce called “Muminmuggar” in their teens. They only sold mugs with the Finish cartoon “Mumin” attached.

From mumin to kitchen

This seems to have been the perfect playground because now they run one of the largest e-commerce for kitchen- and homeware in the country, KitchenTime.se.

The underdogs from the old days have now grown into very established players. Some are probably considering to fight Amazon and continue to sell directly to their loyal customers.

This is not an issue for Amazon. Because they offer a marketplace where anyone can sell anything. Without ever touching the product if you will. You see, they offer something called Fulfillment by Amazon (FBA).

Basically, you can reach out to a supplier that has a product you like to partner with. Then have them deliver your products directly to Amazon. Amazon will market the product, sell it, hold it in stock for you, then pack it up and ship it straight to the customer.

It’s clearly a different time. Much like the largest taxi company in the world has no drivers (Uber). And the largest hotel company doesn’t own any rooms (hotels.com). The largest warehouse today doesn’t have any products of their own.

Amazon doesn’t need to flirt with established players in Sweden. Maybe assimilation is inevitable and resistance is futile. Time will tell. Meanwhile, Amazon can just sit back and wait for the new underdogs!

Enter the new underdogs of 2020

The new underdogs are young and small business owners, very much like before. But setting up a traditional ecommerce to try to compete is no longer an option. Because the established players have spent decades building up organic traffic to their sites by focusing on SEO, ads, keywords and inlinks.

To their advantage however, the new underdogs don’t require any employees nor office. They can skip warehousing and fulfillment. Huge overhead cost savings meaning they require lower margins. This is what the typical breakdown should look like for an FBA oriented business:

Breakdown of FBA business costs and profit

The new underdogs will be able to compete through Amazon. Why? They have some extremely sophisticated software tools to spot holes in the market. Just go to YouTube and type “Amazon FBA software tools” (Yes. After that you will be bombarded with ads for free ebooks and online training on the subject. For weeks. I warned you.)

FBA software analysis

These new players don’t need to be passionate about their products, they just need to find a product with good-enough margins. Their dream is not to build a huge company, they have modest goals. They just want to work whenever they want, from wherever they want.

Their game is completely different. Instead of building a perfectly optimized ecommerce with a good user experience and tremendous SEO. They simply focus on building the best product page on Amazon and hunt reviews like there was no tomorrow. Saving them thousands of hours.

Amazon compete on convenience, not price

A common misconception seems to be that Amazon will offer lower prices. And early reviews focus too much on the fact that the products currently available in Sweden are very few and expensive. While I believe this is a temporary issue, most people seem to have missed Amazon’s main selling point. Namely: convenience.

When living in Spain we only paid 3.6€ / month to get access to free 24-hour shipping on two million products, without “minimum order” restriction. Delivered to your doorstep!

Like if that was not enough, you also gained access to Amazon Prime (their Netflix equivalent), Prime Reading (huge library of ebooks), and Amazon Music (Spotify equivalent). For almost the same price you pay for a single shipment in Sweden. Insane!

To paint you the picture I’ll give you a real-life example. One day while living in Spain I was in desperate need to buy a handheld screwdriver/drill. As a true local hero, I opted out to use Amazon in an attempt to support local businesses. I visited the website of a local DIY store to make sure they had it in stock and hit the road. At the store, they said they didn’t have it after all.

Here is how I wish the conversation went after that: “If you pay now we can have it delivered to your door tomorrow”.

Instead, they unenthusiastically said they could perhaps order it for me. It would take anywhere between 2-4 days. I would have to visit the store again and get lucky because they didn’t have any system to notify me when it was back in stock.

I went home and bought it on Amazon. It was delivered to my doorstep within 12 hours. I don’t remember if I paid slightly less or more because I didn’t care.

That’s why Mall Death is a real thing. Everything comes down to convenience, not price.

Customer Service

On the topic of returns. What is better? To immediately deliver a replacement while picking up the faulty one. At your doorstep. Within 24 hours.

Or, talking to a nice friendly customer expert that is super passionate and knows a lot about the product. A person that really cares, feels sorry for you, and first wants to figure out what’s wrong. Then offer a replacement in a few days.

Really? You are the kind of person that just wants a replacement as quickly as possible, without any questions asked? Thought so.

Sure, cheap products can be found on Amazon

The upside for Amazon is that they can provide an unmatched selection of products with price comparisons and “similar products” from any vendor directly on their product page.

They don’t care which product you pick, they make roughly the same money anyway. Other e-commerce platforms can’t… Because they are always going to be biased towards one product or the other.

Will businesses that sell products on Amazon compete on price? Yes and no.

Amazon is a marketplace, but it’s not a perfect market. This means that not all products are going to be cheaper. In fact, I could probably find a cheaper option elsewhere for most of my Amazon purchases. So “good price” is not the first thing that comes to mind when I think of Amazon.

Very popular products will likely be under heavy competition and thus offer a nice price.

What usually happens is that you find the same product from different sellers on Amazon. One FBA seller offering the product for a premium because it can be shipped overnight, and then another seller that offers a more competitive price (if you can wait a few days). Buyer’s choice.

Unfair advantage: no profits required

Amazon is known to use its cash-flow to fuel growth and defer profits. Thankfully other departments within the company are showing better numbers. Amazon Web Services, Amazon Prime, Amazon Books/Kindle etc.

That’s why they can offer unlimited free shipping to your doorstep for only 3.99€ in Spain. They have some major logistical issues to overcome before that happens in Sweden. If they do, the price point will certainly be higher. Maybe they’ll offer this unlimited home delivery subscription, at least in the bigger cities. Time will tell.

Bad user experience

Amazon website on launch day

In the Swedish newspapers this morning you could read “The industry is not impressed by Amazon’s Swedish site”.

I’ve heard Swedes complain about the user experience of Amazon already. And it’s true, the reason is that many Swedish e-commerce services have spent a lot of effort in offering a pleasant customer experience. It’s impressive. Maybe we are spoiled.

Let’s not forget that Amazon is a heavy mega super data-driven company. This cannot be overstated. They are known to be masters of masters of A/B testing (yes, masters of masters).

The Amazon experience might not look impressive at first glance, but it’s so optimized and tested. Constantly improved upon. They are not looking for something fancy, they are looking for whatever works. If they can improve their conversion rate by only 0.01% - they will do so.

Bad product page translations on launch day. On purpose?

Yesterday, a lot of poor translations of German product pages could be seen when they launched in Sweden. This resulted in some really funny products with words like dick, rape, and feces in the title or product description. Most people in Sweden have seen them circulating on social media platforms or old media.

Some have started to speculate whether this is the works of a PR mastermind. I think the explanation is much simpler than that. They knew but simply didn’t care.

Badly translated product pages are better than an empty marketplace. The option would be to polish and wait a few more months and miss the X-mas craze.

Amazon indicated earlier this year that they were about to launch in 2020 but failed to communicate any exact launch date. Therefore it came as a surprise. This sends a clear signal. Their launch is not dependent on established players. They didn’t tell them months in advance and gave them access to their platform to add products beforehand.

While most companies can’t rely on “build it, and they will come” it’s certainly true for Amazon. And “the new underdogs” have been waiting to fill up the catalog. Which certainly is taking place as we speak. Maybe a few established players will at least test it out as well.

One thing is for certain, Amazon is in it for the long run. They don’t care about the results of November+December sales in Sweden. But the timing for a launch now is too good to say no to. You could say it’s premature, but not bad enough that it will affect the results in the years that follow.

Just to be clear:

Amazon didn’t launch now hoping to sell stuff in November and December. They launched because they want to attract the sellers that believe they can.

Even if the sellers don’t get a single customer, Amazon still gains more products in their marketplace.

But Amazon is bad?

A lot has been said about their poor ethics. Many people have left the company with really shocking witness statements. The working conditions on Amazon’s fulfillment center are horrible. It’s awful and not ok.

However… Their main goal (for good and bad) is world domination, not making their employees happy.

That doesn’t mean that they don’t care about people. Have you seen any video from inside their fulfillment centers lately? They invest heavily in automation.

Amazon fulfillment robots

They are not fixing unhappiness in the workplace for a reason. Because trying to find ways to make that job more fun or pleasurable is impossible. Amazon is instead working on freeing everyone from these extremely monotonous tasks. If they don’t do it, somebody else will. For them, unhappy workers in their warehouses is a temporary problem.

Beg to differ? Just visit any local e-commerce fulfillment center and help them out before Christmas. They sure need all help they can get. Then come back and let us know if you suddenly discovered your dream job.

Amazon will change logistics in Sweden

Logistics in Sweden is completely broken. Shipments to the north of Sweden take 3-4 days and home delivery is not that easy because of the vast distances. No actor has had any incentive to fix it… yet.

Enter “economies of scale” (sv. skaldriftsfördelar). My bet is that Amazon will disrupt how packages are delivered in Sweden. They will offer convenience that no other shipping company could do before. Or compete with for that matter.

Amazon will set up exclusive logistic routes to ensure faster shipping than anyone.

Just look at where Amazon has placed one of its logistic centers. One is in Eskilstuna. Great connection with train and major highways. But what’s more interesting, that nobody talks about, is the fact that it’s right on an airstrip!

Sweden has 10 larger airports and <30 smaller airports for passengers. Additionally, we have more than 145 airports that nobody seems to care about except for local hobbyists. They are usually owned by municipalities or regions, subsidized by the state to keep them in shape. Eskilstuna is one of them.

The kicker for these less used airports: there is no landing fee. At least not yet. One potential scenario would be to use some strategically placed airports as hubs and have daily flights. Maybe even weekends. Then only make the final stretch by truck/car. This will bring down the delivery time tremendously.

Amazon UAV flying over sweden - staged

What’s even crazier is that autonomous airplanes in Sweden are heavily underregulated (EU wide regulations are expected next year).

While you still need a pilot operating remotely, you can get a simple certification in a few days and each pilot can fly up to six planes simultaneously (?!). Unmanned Aerial Vehicles (UAVs) are allowed around these airports since it’s considered unregulated airspace.

Does this mean that Amazon will use autonomous airplanes in Sweden to deliver packages? Probably not, for many years to come. But it would certainly be a good testbed. Imagine environmentally friendly autonomous aircraft with no landing fees. That’s the future.

Amazon will offer better convenience at pickup stations.

The pickup experience in Sweden has suffered a lot since the privatization of the postal service. Usually, your package ends up in a local supermarket or a convenience store.

This seemed wise in the beginning, but nobody could foresee the unstoppable growth in online shopping.

Now we are in a situation where these small rooms easily become overfilled. And the people that work there have their main business to run. So sorting packages and handing them out is always second priority. As a customer, you often have to wait in line and you probably get a notification later than you could.

For customers that don’t want to pay for home delivery, they might offer the next best thing: their locker solution.

Amazon Locker

To conclude

Amazon is here to stay and they will definitely shake things up. Established players that think they can fight this by offering “fast” “free” shipping and “better support” better think again. Nobody wants a phone number to call. They just want their stuff, delivered as fast and conveniently as possible.

I hope you enjoyed these random thoughts. Leave a comment below and please share this post with people that need to hear it. Your appreciation is my fuel.

Header photo by Amazon Inc.