February 5, 2007
Amazon Launches Platform for European Growth
Amazon.com has made a significant business for itself by helping other retailers develop and operate their own e-commerce sites. Chains such as Target have found working with Amazon provides a number of benefits in the know-how related to running an online business. but also for some of the traffic directed its way from the Amazon.com website.
Now, European retailers Mothercare and Marks & Spencer have plans to roll out new sites with Amazon launching e-commerce platforms for the two.
The time for expansion seems right based on projections for the U.K. and the European continent.
Consumers from European nations are flocking to the internet in large numbers. Between 2006 and 2011, the number of people who go online to shop is expected to grow from 100 million to 174 million. At the same time, sales revenues are expected to more than double, according to Forrester Research.
Tamara Mendelsohn, a senior analyst at Forrester, told the Puget Sound Business Journal, “The time is right for the U.K. market and other markets in Western Europe. Growth rates for e-commerce are strong. Businesses are beginning to evaluate their options, and there are many companies moving to new platforms.”
There’s no doubt that working with other retailers have been a benefit to the top and bottom lines at Amazon.com. But not all is rosy. The company had a high-profile breakup with Toys R Us and Borders Group is said to be looking at its relationship with Amazon to determine if it should continue. In the U.K., Amazon had engaged in a similar relationship bookseller, Waterstone’s, a unit of HMV Group, which ended when the chain chose to launch its own online business.
Amazon has a number of other initiatives it has launched to support retail partners including Fulfillment by Amazon, which lets merchants selling through Amazon have access to its warehouses and/or fulfillment centers.
The e-tail giant also launched WebStore to give smaller companies the ability to create their own branded sites backed by the sophistication of Amazon’s technology.
Discussion Questions: Where do you see Amazon’s business in terms of being an e-tailer itself and also as being a third-party service provider? Which of these aspects of the company’s business or perhaps another not mentioned here do you think offers it the greatest opportunities moving into the future?
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Jeff Bezos has always recognized that the extended e-commerce infrastructure is his major difference. Providing this infrastructure to other retailers makes sound business sense as long as it doesn’t defocus from Amazon’s core business.
This reminds me of the early days of suburban shopping malls. In those days, many of the department store chains opened real estate divisions and become developers. Smaller regional chains were clamoring to get mall space at the time because it was a bonanza. They didn’t mind enriching their department store competitors in the process. Not long after, however, the Simon’s, Rouse’s and DeBartolo’s of the world became dominant players in mall development. This same process will probably occur with Amazon. It’s too challenging to be both a great retailer and a great infrastructure. Powerful online merchant outsourcers will emerge. Meanwhile, Jeff Bezos is smart to build this part of his business.
Amazon is a technology company that enables retailing. The company doesn’t care where sales are made, only that its platform supports it all.
Mothercare and Marks & Spencer will team up with Amazon if all concerned can find a way to make money. Online retailing can have a very high cost structure compared to its margins. Toys R Us and Amazon got a divorce because both parties need to make a profit. The initial promise and thrill of married life sometimes clashes with the post-wedding reality. In the US, half of all marriages fail. Let’s see if the Amazon European marriages last. Marriages that succeed take a lot of work, skill, maturity, and luck.
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Jeff Bezos has always recognized that the extended e-commerce infrastructure is his major difference. Providing this infrastructure to other retailers makes sound business sense as long as it doesn’t defocus from Amazon’s core business.
This reminds me of the early days of suburban shopping malls. In those days, many of the department store chains opened real estate divisions and become developers. Smaller regional chains were clamoring to get mall space at the time because it was a bonanza. They didn’t mind enriching their department store competitors in the process. Not long after, however, the Simon’s, Rouse’s and DeBartolo’s of the world became dominant players in mall development. This same process will probably occur with Amazon. It’s too challenging to be both a great retailer and a great infrastructure. Powerful online merchant outsourcers will emerge. Meanwhile, Jeff Bezos is smart to build this part of his business.
Amazon is a technology company that enables retailing. The company doesn’t care where sales are made, only that its platform supports it all.
Mothercare and Marks & Spencer will team up with Amazon if all concerned can find a way to make money. Online retailing can have a very high cost structure compared to its margins. Toys R Us and Amazon got a divorce because both parties need to make a profit. The initial promise and thrill of married life sometimes clashes with the post-wedding reality. In the US, half of all marriages fail. Let’s see if the Amazon European marriages last. Marriages that succeed take a lot of work, skill, maturity, and luck.