Amazon Europe Strategy

Amazon Europe Strategy

In 2003, Amazon Europe was faced with the challenge of restructuring it's distribution network in order to meet growth demands. After five years of operations through three independently run organizations in the UK, Germany, and France, the company recognized the need to adapt it's business structure and positioning in the markets. Although many areas of the supply chain had already been optimized, there was significant room for further improvement. The European markets were expanding rapidly, and it was certain that the current structure would not be sufficient, even in the near future.

Amazon's objective in Europe

The original goal, set in 2002 at the US headquarters, was for Amazon Europe to "catch up" with the US operations by 2007. In order to reach the objective, three key measures were considered for implementation: expand the product offering (similar to the US range); realize new Marketplace activities (Amazon's platform for additional business sectors); introduce Amazon in additional European markets.

In considering one or more of the above options, the company was also faced with the task of determining the level of centralization for its activities. Depending on the specific construction of the network, there would be potential to bundle tasks which were being performed individually in each of the existing markets. The key would be to find the balance between utilizing synergies for efficiency and keeping sufficient flexibility in each country in order to tailor to market specifics.

Amazon's development in the U.S. as a model

Speed, simplicity, and enjoyment for the customer were the initial drivers for Amazon in the US in 1995, and upon its rapid success it soon claimed to be the "Earth's Biggest Bookstore". Inventories were kept at low levels, as the company depended on wholesalers to carry stock and supply books upon request. Soon there were direct relations with publishers, and although they proved not to be as efficient as the wholesales with regard to supply, their discounts were slightly higher. Typical order fulfilment times for Amazon customers ranged from four to seven days.

In the first three years of the company's existence, the Distribution Center capacities expanded, the number of titles in stock grew, and major investments were made in logistics (particularly back office). Delivery times were reduced and customer service was improved as a result of the expansion. As competion continued to intensify, Amazon pursued a massive growth strategy - in product selection as well as in physical infrastructure (6 additional DC's were opened).