Case study on how Amazon established itself in Europe

1. Amazon.com
How Amazon established itself in Europe
GROUP MEMBERS :
GUNJAN HALDAR 19JE0339
HARSH KHATRI 19JE0349
HARSH KUMAR 19JE0351

2. Launching Amazon in UK and Germany
● In 1998, Amazon entered the European market, targeting the two
countries—the United Kingdom and Germany.
● Factors favouring Germany and The United Kingdom.
○ Germany had approximately 2,000 publishing houses.
○ German customers were accustomed to buying books through
mail-order companies.
○ In the UK, government-regulated fixed retail book prices and the
consequent development of new distribution channels.

3. Launching Amazon in UK and Germany
● In April 1998 Amazon acquired a leading online book retailer in each
country, Bookpages.co.uk in the United Kingdom and Telebuch.de in
Germany and rebranded under Amazon as Amazon.co.uk and
Amazon.de respectively.
● Duplicating the US “Get Big Fast” strategy, they began selling other
products like Music, Auctions and zShops.
● Soon Amazon became the leading online bookseller in the UK and
Germany and had over a million active customers.

4. Launching Amazon in France
● Continued its expansion by opening Amazon.fr in France by building
the site from scratch.
● Unlike the UK and Germany, Amazon faced tough competition from
companies like Fnac.com, Alapage.com and BOL, as they also
started selling other products at the same time.

5. Challenges faced by Amazon in Europe

6. ● Major challenges were due to cultural differences among the targeted
countries.
● Solution:
○ Amazon treated the whole European market as an aggregate of
regional market where each market complied with the legal and
cultural regulations.
○ It decided to maintain dedicated websites for the three
markets(UK, Germany and France).
○ Also built dedicated 24 hours native language speaking customer
service centers.

7. ● Amazon needed to address selling regulations in each country.
● Solution:
○ Introduced free shipping in 2001.
○ Amazon set up promotional activities such as clearance sales
permitted on “slow moving” book inventory during a specific time
frame defined by local governments.
● Payment Options (38% online credit card users in Europe).
● Solution:
○ Allowed payment through cheques for French customers and
postal orders for German customers.

8. ● Amazon was not able to replicate its US procurement strategy in
Germany and France because France had no wholesaler for
media(books, music and video) and Germany had only single
wholesaler in books and music each.
● Solution:
○ Established direct relationship with hundreds of publishers and
distributors. Orders were directly placed to them.
○ To communicate with its US suppliers, it used EDI (electronic data
interchange) for fast communication to check the availability of an
item. The corresponding information regarding the item was then
updated on the websites.

9. Organization of Amazon European Subsidiaries
● Amazon.co.uk, Amazon.de, and Amazon.fr were managed as independent
Amazon.com subsidiaries run in a decentralized manner. Each country had
its own organization and was headed by a country manager.
● Each subsidiary owned and operated a dedicated warehouse. Location was
chosen primarily for its low labor costs. Like for UK - Marston Gate, France -
Orleans and Germany - Bad Hersfeld.
● Amazon began major cost-cutting to reach profitability in 2001.
○ Reduced customer’s service operation from 3 to 2 by transferring from
Netherlands to UK and Germany.
○ Unified the marketing and branding functions of the three subsidiaries at
the European level.

10. Tom Taylor - Senior Vice President, Amazon Alexa
● Was transferred from Seattle to London to expand Amazon in other European
countries and increase Amazon’s infrastructure.
● His early focus in Europe was to look for standardization and synergies
among operations processes across the three different countries.
● He picked “easy win” areas where porting US techniques to Europe would
provide immediate impact.
● Within a year, Taylor's team had raised the proportion of high velocity items in
stock, created and implemented vendor scorecards, decreased customer
order backlogs, and developed a process that provided the distribution
centers with a clear listing of receipts and shipments due in the following
weeks.

11. ● To reduce customer order backlog Tom’s team
○ built a comprehensive daily report for each of the three countries
presenting a breakdown of backlogs according to the type of issue(s)
preventing Amazon from fulfilling orders within the timeframe promised
the customer
○ Issues were classified as -
■ Supply chain type; order had been placed to the wholesaler but not
received by Amazon
■ DC type; item has been received but not recorded in stock
■ Customer type; payment done by the customer but not received by
Amazon
○ Each issue was assigned to a different person who analysed the problem
and implemented a solution.

12. EDN - European Distribution Network
● Taylor had laid out possible benefits of an EDN to Amazon Europe.
● It could significantly expand product selection of current sites through
fulfillment from other DCs ( Distribution Centre).
● It would facilitate global sourcing from lowest cost vendors and allow
inventory planning at the global network level.
● It would reduce the risk of relying on a single DC to serve a large base of
customers.
● It could improve customers' experience by enabling Amazon to select the
appropriate DC to fulfill a customer order.
● If some warehouse is having huge backlog it can assign to another DC
according to the location.

13. Tom Taylor’s Suggestions
● link the different sites to a single European distribution center.
● keep the three distribution centers and allow them to fulfill customer
orders (perhaps using a drop shipment approach) from other country
sites. In that case, Amazon would have to determine which products
to be drop, shipped and when
● keep two DCs, one serving North European customers and the other
serving South European customers. Again, DC location,
transportation plans, and other implementation decisions would have
to be determined.

14. Problems faced while implementing EDN
● To build a sustainable EDN, Amazon would have to redesign its
transportation processes and select the appropriate carriers that would meet
its delivery-time and price standards.
● Most of the customers are accustomed with next day delivery. To address
this, the transportation team would have to work collaboratively with customer
service to educate customers to associate a different shipping price to the
delivery service level chosen.
● EDN would also require a better coordination among departments and a clear
HR plan.
● Network optimization could lead to reduction of staff in the operations team.
● Under an EDN, its procurement department would be able to centralize its
purchases and extract higher volume discounts from suppliers. However,
suppliers of common media products were extremely concentrated

15. CONCLUSION
From here we can conclude there are two sides of
implementing EDN
● proficiently handling backlogs.
● there must be a clear communication among the team
so that everything can go smoothly.

16. THANK YOU