Amazon wants to crack Sweden. This could turn out to be its biggest challenge yet
The arrival of Amazon's online retail arm in Sweden last October caused no shortage of agitation, speculation – and mirth. Six months on, the most striking thing about its Swedish operation is the silence currently surrounding it.
For some, the company's muted impact on e-sellers, consumers and labor practices is indicative of the strength of the country's established online market and unionized workforce. For others, this quiet is very much the ominous calm before the storm – before Amazon's corporate imperative collides with fundamental pillars of Swedish identity and culture.
Innovation
When Amazon.se launched, it trumpeted a range of 150 million products across 30 categories from books to toys. Unfortunately for the retail giant, in the media, the loudest furore around Amazon's Swedish launch centred on its inept and rather rude product translations from English to Swedish. Customers could find bespoke items like a baking tray for 'goose water' and specialist collectables like "bottom with bunch of flowers" (a Smurf figurine holding a bouquet). Less comic, but equally baffling, was the use of the Argentine flag in place of the yellow-blue one of Sweden.
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While such bungling was a source of amusement for Swedes too, the domestic press devoted far more column inches to debating the threat posed by Amazon. Some commentators declared that the retail industry would never be the same again. Others likened Amazon's coming to an invasion, fearing its effect on Swedish retail and Swedish trade unions. Booksellers in particular were concerned about prices being squeezed and increased competition, although they took some comfort in their existing online presence and customer base.
In fact, the main source of optimism was – and remains – Sweden's mature e-commerce market. Online shopping has grown steadily in Sweden since the early 2000s: in 2012, more books were sold online than in physical bookshops for the first time; in 2017 e-sales accounted for 15% of the turnover of consumer durables; and by 2019 70% of Swedes were shopping online. And in a pandemic-hit 2020, Swedish e-commerce experienced record growth of over 40%. Amazon, then, is fighting for its place in a highly competitive online ecosystem, and its rivals are already used to operating with slim profit margins.
This is in stark contrast to the fledgling days of internet shopping in 1998, when Amazon launched in both Britain and Germany. Of course, Swedish shoppers could make purchases from these Amazon marketplaces prior to last October, which meant the online retail giant already had a small presence in the country.
"In 2019 we estimated its share of the Swedish e-commerce market at about 1%," says Johan Davidson, chief economist at the Swedish Trade Federation. "Thus far, I don't believe there has been a significant change in this market share."
This is backed up by a survey of 1,000 Swedes by Qvik in March, which found that 67% had not tried shopping on Amazon, while 16% had tried it once before returning to their previous online retailers. Moreover, 21% had elected not to use it because they perceived it as a threat to local businesses, an indication of the strength of the Nordic retail bubble that Amazon is hoping to pop.
And some commentators assert that, despite the slow start, it might well succeed in doing so. In February, a report by Boston Consulting Group predicted that Amazon would be the biggest online retailer in Sweden within 5-10 years, citing its wide range of product sectors and its experience optimizing last-mile delivery in other countries. Swedish online retailers are also bracing themselves for the launch of Amazon Prime. Whether this year or the next, the onset of its fast and free delivery will force them to reassess their logistics, as well as consider competing on terms other than price. For a retailer, this could be by offering a more specialist product selection; for a marketplace, this could be by fostering strong relationships with third-party vendors.
Amazon itself appears satisfied with its progress and prospects in Sweden. "We are really pleased with our first few months of business in Sweden," says an Amazon spokesperson, "and are optimistic that we will continue to improve and build upon the experience for our Swedish customers."
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Other experts are more skeptical about the potential for Amazon's expansion. "I can't see Amazon dominating the e-commerce market in Sweden in the short or the long-term," says Arne Andersson, E-commerce advisor at Postnord.
Andersson provides the example of Australia: it too had a well-developed online retail sector when Amazon launched in 2017, and the company's market share has only reached 4% there. Instead of fearing Amazon's arrival, he asserts that "it is an opportunity for Swedish companies to learn more about the business model of how to sell through these sorts of platforms."
Yet it's harder to see positive signs for Swedish workplace culture. Approximately 70% of the Swedish workforce belong to a union, and collective agreements underpin negotiations between employees and employers.
"They are the norm in the e-commerce sector," says Fritjof Carlsson-Brandt, secretary of press for Handels, the Commercial Employees' Union.
Currently, staff at Amazon's warehouse in Eskilstuna, a little over one hour's drive west of Stockholm, have such an agreement with the sub-contractor, German logistics firm Kuehne Nagel. But if Amazon were to expand with its own warehouses and distribution network, for example upon the launch of Prime, then its disdain for union collaboration could be a source of conflict.
"We've not had any indications that Amazon would be willing to work with Swedish unions or sign a collective agreement," says Carlsson-Brandt.
As might be expected in a nation that prides itself on its egalitarianism, the retail behemoth's resistance to union activity as seen in the US has aroused unease far beyond the confines of labor organizations. In February, before the Alabama union vote, Swedish insurer Folksam and financial group Öhman contacted Amazon with a letter signed by 76 international investors demanding that the company respect its employees' right to organize.
The mixture of fear and opportunity surrounding Amazon in Sweden is emblematic of the impact of expansionist multinationals on small and medium-sized countries. Sweden became Amazon's 18th national marketplace, but Amazon is, if only in terms of its gargantuan scale, a special case for the country. Its attempt to avoid a new tax on electronics prior to its launch indicated that it sees itself as the exception. Yet perhaps Sweden, with its union culture, retail bubble and Nordic ideals, will in time prove to be an exceptional challenge for Amazon.