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Blog | Feb 17

Amazon.se opened a new chapter in Nordic e-commerce — will there be space for e-commerce entrepreneurs?

Amazon.se opened a new chapter in Nordic e-commerce — will there be space for e-commerce entrepreneurs?

The opportunities for entrepreneurs with a novel product, brand, and business model vision are extensive, writes Maki’s investment director Paavo Räisänen

I started my journey in the tech industry as a part-time web developer twenty years ago, back when many companies were taking their first steps online and into the e-commerce sphere. In the early 2000s, most of the online trade was local, meaning that the international e-commerce leap was still ahead. As the business grew, it started also to expand cross-borders — in 2016, 15 percent of global e-commerce was international, and it is projected to grow to 22 percent in 2022.

Right now, Amazon is the leader of global e-commerce, accounting for close to 40 percent of US e-sales, and more than 10 percent of global online retail. It launched as an online bookstore in the US in 1994, kicked off its international business in 1998 in the UK and Germany, and started its Asian takeover by opening in Japan in 2000. This fall Amazon expanded to the Nordics as it launched its operations in Sweden.

Amazon’s growth from a bookstore to a multinational giant selling pretty much anything you can imagine has been rapid: total time from its 1997 IPO to $100 billion in market cap was just under 15 years. Today, Amazon is the fourth largest company in the world with a market cap of $1.5 trillion and is worth more than the USA’s nine largest traditional retailers, including Walmart, Costco, and The Home Depot.

There are plenty of explanations for how Amazon grew into their gigantic state, but at the success’ core is their wide range of products and their efficient logistics and fast, often free, deliveries.

The growth of e-commerce doesn’t stop at Amazon

The e-commerce field has taken many remarkable leaps during the past twenty years, but I feel that the industry has not yet fulfilled all its potential: I don’t think the constantly growing Amazon is the answer to everything. Instead, I believe there is plenty of room for other, digitally native, global D2C brands.

While Amazon truly has been wildly successful and getting most of the headlines, at the same time it has become easier than ever for others, too, to start an international e-commerce business. A lot is admittedly thanks to Amazon: Amazon Marketplace has given more than five million sellers a platform to distribute their products, and the program called Fulfilment by Amazon functions as a third-party logistics provider (3PL) service that allows other businesses to use the company’s infrastructure to provide ecommerce fulfillment for their own customers.

But you don’t automatically need to reach out to Amazon in order to build your e-commerce business. The following tools and solutions could help you smooth out some of the kinks of starting your independent online retail company.

  1. E-commerce platforms. Modern online retail services make starting your own D2C business simple even for smaller operators. One big winner in the game is the Canadian Shopify which offers a cloud-based online commerce platform for vendors all around the world — these days the service is used by more than a million businesses.

  2. Payment solutions. Finding the right payment options for your business is also easier than ever. You can choose from Adyen, Stripe, Apple Pay, Google Pay, PayPal (which, by the way, has been around for almost as long as Amazon), just to name a few.

  3. Logistics. First 3PL providers made shipping and receiving, transportation, warehousing, and distribution easier locally. Nowadays digital 3PL companies such as OGOship offer the same services with multiple warehouse options in different countries.

  4. Social media, marketing automation, and conversion improvement solutions. Today, there’s a plethora of different marketing automation providers, such as Mailchimp, Hubspot, and Marketo, helping you optimize your and your team’s resources. A lot of the questions related to, say, improving your conversion rate are already solved by someone else with the solutions easily available online.

Thanks to all the necessary tools and service providers out there, it is now easier than ever to start a new e-commerce business. The opportunities for entrepreneurs with a novel product, brand, and business model vision are extensive.

How to make it as an e-commerce founder?

The tools are there, but how do you compete against a giant like Amazon, you might ask. And that is a good question: building a sustainable and successful business that doesn’t instantly lose markets to Amazon or become just another product at Amazon is not as simple as just putting the right tools to use. But it isn’t impossible either.

After putting the aforementioned tools to use, there are a few boxes you should tick in order to make it in the e-commerce world in the age of Amazon.

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For one, you need to have a deep understanding of your customers: know your target audience — what they want, need, and how they consume — and how to offer them your product in a way that is more compelling than your competitors’. It might also be an appealing thought to be able to cater to a limitless audience with numerous different products, but concentrating on a focused product offering pays off. Do not try to serve everything for everyone.

You should also be thinking about your brand early on. As Maki’s very own Pauliina Martikainen explains in her blog post, being brand-driven (ie. having a deep, nuanced understanding of how your product interacts with human emotion) is effectively future-proofing your company for the rapidly changing times, regardless of your industry or business model. The brand should also be visible in packing materials, in different delivery types (especially if you aim for a sustainable brand), and customization. If the brand is strong, distinctive, and in the core of the company, it can be applied more flexibly across all touchpoints to remain relevant and competitive across time

Customer loyalty should be valued and constantly reinforced — never underestimate the significance of a strong and content customer base. One way to make sure that the customer keeps on coming back is by choosing subscription-basedness as your e-commerce business model. Think Alvar Pet: the eco-friendly dog food company delivering food that is personalized for the dog’s needs and doing it directly to the dog owner’s door. It not only eases the customers’ everyday life, but also keeps them easily on board for a long customership.

Be sure to exceed your customers’ expectations with faster than expected delivery, service that feels personal, and by going the extra mile when resolving problematic customer issues. You can also make sure your customers keep coming back with carefully chosen marketing initiatives: would a customer loyalty program with exclusive deals fit your product or service, how about a mailing list or being active on social media? There are plenty of ways to get more repeat customers to your business, you just need to find the ones that work for you.

One way to make sure your business finds its customers is to go international, especially if your product has a narrow customer selection. When you expand your customer base from early on, reaching economies of scale happens more efficiently.

Last, but definitely not least, focus on the core of your business, and leave the logistics to an outsourced partner. Online retailers in countries where e-commerce business is well established consider it pretty much impossible to compete with global logistics if you are not using a 3PL partner. Choosing a logistics partner that can deliver from multiple warehouses and uses the best available last mile delivery partners in local markets lets you focus on the important: your product.

It is true that Amazon is a real threat for traditional local online retailers who are reselling well-known global brands. But for digitally native D2C brands, the future looks bright: we can expect to see more and more such brands emerging in the upcoming years, and those companies can both benefit from Amazon by using it as a sales channel and avoid going head-to-head against it by focusing on their own brand.

And we at Maki.vc are always on the lookout for new D2C brands and B2B SaaS companies supporting eCommerce businesses — so if it’s you, lets@maki.vc?

Author: Paavo Räisänen is an early-stage VC investor at Maki.vc and Board Member at OGOship. paavo@maki.vc @PaavoRaisanen

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