In its second-largest acquisition, Amazon buys the company for $970 million.
Amazon.com has taken the lead in European web sales by sticking to its proven playbook.
Amazon.com Inc. (Europe) has taken the lead in European web sales by sticking to its proven playbook: outstanding customer service, wide product selection and low prices.
The U.S.-based retailer had sales that reached an Internet Retailer-estimated 9.36 billion euros (US$13.0 billion) in 2010, up 39.7% from 6.70 billion euros (US$9.3 billion) in 2009, according to Internet Retailer’s new Top 300 Europe research guide.
Amazon got an early toehold in Europe and hasn’t let go, experts say.
“Amazon has had a tremendously successful strategyin Europe,” says Colin Sebastian, digital media and Internet analyst with Lazard Capital. “They have focused on several large markets—the United Kingdom and Germany—and expanded into others.”
Amazon is the leading web retailer in Europe, followed by Otto Group and Tesco Stores, according to research for the Top 300 Europe. And the company’s efforts to become an early web retailing force in Europe have paid off, Sebastian says.
“No single large player is able to compete with Amazon,” he says. “They can leverage their infrastructure and technology, and I don’t see them facing any significant headwinds.”
Amazon also has tailored its web offerings to local markets, by hiring merchandising staff from each of the European countries it’s targeted, says Scot Wingo, CEO of ChannelAdvisor and a longtime Amazon observer.
“It appears Amazon has layered on ‘local flavor’ by hiring local buyers who know the market,” he says.
Amazon, which began selling books online in Great Britain in 1997, also now has a centralized operation in Europe, including nine fulfillment centers in the Great Britain, France, Germany and Iceland, a customer service center in Germany, and a research and development center in Great Britain.
Amazon also continues to grow its European base by making key acquisitions and investing in fast-growth companies, says Wingo. In October, Amazon acquired BuyVip.com, a fashion and lifestyle online buying community with more than 6 million members in Spain, Germany and Italy. The purchase price was not disclosed.
A big part of Amazon’s success in Europe comes from the sales other retailers make on Amazon’s sites. The web retailer relies more on these third-party retailers overseas, Wingo says.
“We believe Amazon is more ‘third-party heavy’ than in the U.S. Overall about one-third of its business is thirdparty in the U.S., and in Europe that percentage is probably onehalf.”
But Amazon’s potential as a competitor could hamper future relationships with some European retailers.
“Some large merchants are nervous about partnering with Amazon,” Wingo says. “That’s where eBay can come in and not compete with them.”
EBay is “kind of a slumbering giant in Europe and going from defense to offense as it pursues new markets,” Wingo says. It could help some of the other top retailers in Europe, which are planning to expand into new countries, he says.
The competitive landscape in Europe will continue to change, says Sebastian.
“We’re going see a wave of offline retailers seeking to build out online sites,” he says. “Wal-mart has a global strategy for e-commerce, so I would count on them becoming more competitive. In Germany, Otto Group is a general retailer and has the ability to sell across borders. And eBay already is one of Amazon’s more significant competitors.”
Still, it will be difficult for other retailers to unseat Amazon at the top of the hill. “Amazon is going to build 20 more fulfillment centers and we believe a lot will be in Europe,” Wingo says.
To order a copy of the Top 300 Europe, click here.