London, United Kingdom – March 5, 2014: Opened Amazon.co.uk shipping package parcel box on wooden floor with protection paper inside. Amazon.com went online in 1995 and is now the largest online retailer in the world. photo credit: GettyGetty
How real is the Amazon effect? Should European retailers prepare and how? I spoke to Natalie Berg and Miya Knights, co-authors of the recently published “Amazon: How the World’s Most Relentless Retailer will Continue to Revolutionize Commerce” about Amazon’s European strategy and how e-commerce players on the continent can play to their strengths to fight off the world’s hungriest e-commerce player.
“Amazon’s ‘modus operandi’ is to focus on sectors that are ripe for disruption. It exposes those that are mediocre and undifferentiated,” says Knights. ”So, to combat any worries of Amazon stealing market share, retailers should focus on what the so-called “Amazon effect” means to their business: that is, how to deliver and capitalize on heightened tech-driven consumer expectations. In our book, Natalie and I urge retailers and brands to learn from Amazon’s innovation and apply those learnings to excel at ‘what Amazon can’t do’ (#WACD), which is service, experience, curation and community – all elements of the shopping experience that should already be important differentiators for regional retailers and/or those focused on a particular sector, including apparel.”
Amazon has a complicated relationship with Europe. The online behemoth frequently uses major EU markets – particularly the UK, France, and Germany – as proving grounds for new technologies and services. However, it still holds a considerably lower market share in Europe overall than it does in the US. In 2018, Amazon controlled 35% of the US apparel market, but only held 8% of Western European sales in the sector, according to Euromonitor data. Clothing and footwear is a fragmented sector, selling products that are difficult to market online. Here, the disparity in market share is pronounced. providing a stark example of the kind of hurdles Amazon faces in Europe.
“Europe is still a priority but it’s becoming tougher for Amazon,” Berg explained. “They’ve always been up against fiercer online competition, particularly in apparel, but now they’re also contending with greater government scrutiny and the resurgence of bricks & mortar retail. In addition, political and economic uncertainty and broader shifts in consumer priorities – i.e. the rise in experiential spending, and a growing focus on sustainability – make for very challenging trading conditions.”
Part of the problem for Amazon – and an opportunity for European retailers – lies in the shopping experience, she says.
“Bricks & mortar retail is learning to defend market share by digitising their physical infrastructure. For example, over half of [UK high street clothing chain] Next’s sales are now online, Berg says. “Fashion retailers are recognizing the opportunity to distance themselves from Amazon’s utilitarian image by becoming more experiential while also leveraging their best assets – their stores. Stores are still very important for trying on and collecting/returning online orders!”
European retailers, in the vein of their US counterparts, can bring more experiences to the store – social media-friendly displays, smart changing rooms, in-store coffee shops – to highlight the see-and-feel aspect of shopping, that Amazon can’t provide. And this differentiation can also be translated online.
“European consumers are quite comfortable buying clothes online, but they see Amazon as a transactional site,” according to Berg. “Amazon’s fundamental problem in apparel is that it’s not seen as a fashion destination. It’s not even really seen as a clothing destination. There are some very agile and innovative incumbents in Europe who, unlike Amazon, are very much seen as fashion destinations. They have a clear idea of who they’re targeting and don’t try to be all things to all people. Digitally native retailers like Asos and Zalando offer the convenience of Amazon (ie try before you buy and same-day delivery, for example), but more product innovation and social influence. In short, Amazon is a technology company selling apparel, Asos is a fashion destination. That’s the difference.”
The way forward – for both digital native brands and traditional retailers shifting to online – is in clear differentiation, investment in the product, as much or more than the platform and a sound, evolving knowledge of the shopper.
Amazon: How the World’s Most Relentless Retailer will Continue to Revolutionize Commerce, published by Kogan Page, is available in all major UK bookstores and via Amazon.