The Dutch don't have what other leading EU economies have: Amazon as the leading e-commerce platform. Amazon skipped the Netherlands, back some years ago, preferring the other countries. In just over a couple of weeks they will kickstart with a full grown Dutch webshop. What are the consequences for existing Dutch webshops, especially for Amazon look-a-like and Dutch leading e-commerce operator BOL?

Yes, Amazon is late. They've probably calculated that getting traction in the UK, Germany and France is more attractive. And they were right. Amazon's e-commerce market share is 30%, 27% and 19% respectively. Just as an example: the UK is the world's third largest e-commerce market, behind the US and China, accounting for €93bn in 2019. So after conquering these three EU markets they've probably thought: "what else, what other EU e-commerce markets are out there?"

The Netherlands is. It's definitely a smaller market, just over 17 million people, 96% of the population are internet users. Then again, as small as it is, the Netherlands is the third biggest EU market, after UK and Germany, valued at €26bn e-commerce sales in 2019. Fast internet is the default option here and Dutch people are already buying at Amazon: in 2018 for some €350mm. So Amazon must have thought: "why not go full throttle there?"

Amazon's total EU e-commerce revenue (just the commerce part and revenue as net sales, opposed to GMV (gross merchandise value, which includes sales of third party merchants)) is estimated at around €28bn, so the Dutch share is hovering just over 1% of the total EU business. Definitely below par.

Dutch Amazon.nl already exists, currently as a portal for e-books only. Dutch consumers buying at Amazon will do so from German Amazon.de. Although they could already browse some pages in Dutch language, most PDPs (product detail pages) will be in German language.

The disadvantage of a late entry in a well established market is that there are already strong leaders: e-commerce platforms with high awareness, trusted amongst loyal consumers. The entry barriers are high. Ahold Delhaize's subsidiary BOL.com is currently the leading platform in the Netherlands. Amazon is a Goliath, BOL with €2.8bn revenue definitely David.

Amazon's realm is luring for Dutch consumers

So what will happen? With all the EU and US experience Amazon holds, what are the odds for the Netherlands? Are they able to grab share, beat the leader? Let's breakdown what it would take to get Dutch consumers into Amazon's realm.

1 Price We are not aware of Amazon's NL pricing strategy yet. Research by Simon-Kucher shows that to compete effectively Amazon's pricing needs to be 10% lower than market leader BOL. In regular normal e-commerce strategies this could be off limits. But not for Amazon: they could easily afford this. The only question would be: will BOL (and others) follow with price decreases? On the subscription part: Amazon's Prime is €5,99 per month and it includes Prime Video and Amazon Photos Storage. BOL's similar Select is a better deal for €9,99 per year, but with fewer options. Amazon could definitely beat BOL on private label including AmazonBasics. Some are owned and operated by Amazon, some by third party resellers exclusively made for Amazon. Although the Dutch consumer is probably not very familiar with these private labels, they could create a big price advantage in the long run.

Compare two PDPs below:

2 Range Without a doubt Amazon's range is beyond limits. An August 2017 listing on Amazon Germany showed 390 million products online, from 240,000 sellers. BOL is said to list a mere 22 million products. By the way, compare this to a variety store or department store format with 20,000 or 40,000 sku's. Amazon's tail is huge because it allows Chinese merchants on the platform (bummer.... slow delivery). Some even say that this might account for 40% of total products online. This should create a clear advantage for Amazon. Though a huge part of the articles Amazon is listing, will probably be at the far right end of the tail. Hence, very slow rotating articles. BOL added fashion recently, as a new and important category, but still with a modest presence and appeal. Amazon could seduce existing BOL-merchants away from BOL to list on Amazon: promising the globe as a market. This is definitely a huge benefit for Amazon and for merchants. BOL will probably prepare and "seduce" existing merchants not to switch, offering lower listing fees. By the way, translating 390 million PDPs into fluent Dutch might also create some complexity. Not only for Chinese merchants.

3 Fulfilment BOL is in the lead, for sure. Amazon is not operating any warehouses in the Netherlands, although they operate over 24 of these humongous buildings in Germany, some even really close to the Dutch border. Fast delivery and fulfilment are crucial for every e-commerce operator. Customers opting for BOL Select get a better deal on fast fulfilment than Prime customers, even with a 2 hour delivery in a city like Amsterdam. It is not likely that fulfilment costs for consumers will differ that much between the two, as they are both aware that this is a critical factor for successful e-commerce. From a capacity standpoint fast delivery could create additional disadvantages for Amazon; there are just not that many possibilities available in the already tense logistics and trucks market. BOL will definitely claim LSPs (Logistic Service Provider) limited capacity.

Amazon fulfilment centre, photo by Geoff Robinson

4 Physical network Again an upside for BOL, although there aren't any BOL physical stores in the Netherlands (as there are several Amazon physical store formats in the US and WholeFoods). BOL works closely together with Albert Heijn, Ahold Delhaize's prime Dutch and leading supermarket brand with nearly 1,000 locations. These stores act as pick up points and an easy location for returning BOL products. Amazon could create a comparable physical retail network with an existing Dutch retailer, but the number of possibilities (formats with high density network and high traffic) are limited.

BOL Pickup Point in Albert Heijn supermarket

5 Voice and Video Amazon has definitely an edge with its ecosystem. For sure Prime with Prime Video and Music (very fast growth in the US and over 150 million subscribers worldwide) and Alexa on Echo, but also Ring and Tado. For consumers into voice and opting to go all the way with domotica, shopping on Amazon, with Prime, could become very attractive. Note that too many analysts think that purchases by smart speakers are taking off. They are not. Smart consumers could compare their monthly subscriptions on Netflix and Spotify and decide that Prime is a better deal, but this is unlikely.

6 Brand The Dutch love BOL, the brand is well known for its funny commercials, high service, easy and not too intrusive UX. BOL's marketing has been very effective. The brand has grown into a household name in the last 20 years, with very high awareness and strong NPS. Although the Dutch are not that loyal to brands (actually they are just deal crazy), this could well be a huge advantage over Amazon. BOL feels friendly. Amazon faces scrutiny because of its sheer power and size. Recent stories about very low wages for personnel in fulfilment centres in Poland and Germany could harm its reputation. Moreover, the Amazon UX might feel a bit too American, with all those bullets, frames and stars. The Dutch might say, understated and very straightforward as they are: "cut the crap, what's in it for me?".

Conclusion. Amazon is on a roll and its pockets are very deep (cash flow from operating activities in 2019: $39bn). For a market as small as the Netherlands it's not a real issue to lower prices, throw in some free delivery and free video and music content. Amazon even built a narrative around continuously investing cashflow back into the company to increase volumes and grab share (read this old but relevant blogpost by Benedict Evans). They could easily walk away with that. Moreover, Amazon's algorithms, data science and AI are stealth.

We'll see what happens. One thing is sure, smaller market places and mediocre pure players will get crushed. Ahold Delhaize's pockets are possibly not that deep, but then again BOL is a vital part of the company. BOL's position is very strong. They are well positioned, but they would need to expand their Select content offering and follow Amazon on pricing, if needed. BOL will do everything to remain in pole position and to create entry barriers.

Some so high that they could stop Goliath.

Additional source: Statista

A Goliath at the border, Amazon entering the Netherlands.