European tech companies are beating Amazon at its own game
Amazon has become such a juggernaut of ecommerce that when it entered a market like Sweden earlier this month, the country’s retailers braced for impact.
But Amazon is far from invincible — it is being outpaced by dozens of competitors.
UK tech company Ocado, for example, has logistics warehouses that are more advanced than those at Amazon’s most-recently built facility in Europe, according to two analysts from London investment bank Peel Hunt.
Ocado’s robots move about three times faster than those in the Amazon Tilbury warehouse and Ocado has automated solutions for some of the difficult grocery problems that Amazon still can’t solve, such as “sniffing” the ripeness of fruit.
And that’s not the only company mounting a challenge to Amazon in Europe, a continent where market penetration is surprisingly low and in many markets — such as Poland — there is no dedicated local service at all.
Amazon controlled 35% of the US apparel and footwear market in 2018, but just 8% of Western European sales, according to Euromonitor data. Competition is fierce from the likes of Otto in Germany, John Lewis in the UK, Zalando in Germany and E.Leclerc in France.
Beyond market share, there are a growing number of tech companies like Ocado which are facing up to Amazon — either by setting up direct rivals to parts of their business or creating technology and services to help bricks and mortar retailers really compete.
This is the first in our three-part series on European companies challenging Amazon. In this part, we look at the companies making the powerful logistics and in-store technology helping traditional retailers take on Amazon. The second part will focus on the European markets that Amazon is still struggling to dominate, with the third looking at challengers to Amazon Web Services cloud business.
The lockdown shopping boom helped lift Amazon’s sales to a record-breaking $96.15bn in the third-quarter — numbers that are similar to the GDP of a small nation — and consolidated Jeff Bezos’s position as the world’s richest man with a personal fortune worth $200bn.
Amazon has for decades now been a phenomenally slick and constantly improving logistics machine, with automated warehouses staffed by robots and a delivery network that will get goods delivered, in some areas, within an hour. It’s left the rest of the ecommerce world trying to figure out how to catch up.
“Amazon sets the bar,” says Steve Hornyack, chief commercial officer at Fabric, an automated warehouse company. “At first it was Prime and 2-day delivery, now the rush is for on-demand same-day delivery. It doesn’t matter whether you really need something as quickly as that, once Amazon does it, that’s what consumers expect.”
The good news is, though, that it is getting easier for other retailers to pick up super-speed retail tech, too, thanks to a handful of new startups, many of which have their roots in Europe. And some of these can even do better than what Amazon has to offer.
Hornyak from the Israeli-born startup Fabric likens what they are building to “a giant vending machine”.
Amazon may have spent billions building more than 175 fulfilment centres around the world, but he says that Fabric is aiming to out-Amazon Amazon by building a series of micro fulfilment centres for retailers.
These can be built at the back of any store, filled with robots and clever software, that will help get online orders processed much more smoothly. The idea is it could take a well-known but mainly bricks and mortar retailer — say, El Corte Ingles in Spain — and make an Amazon.
The fulfilment centres tend to be between 500m2 to 3000 sq2 in size, pocket-sized compared to an Amazon mega warehouse. But the advantage is that they can be located close to customers, in city centres, and so deliveries can be made more quickly, says Hornyak .
Fabric has built automated centres like this in Israel for Rami Levy, the supermarket chain, and Super-Pharm, the pharmacy group.
