Amazon’s European Distribution Strategy

In 1998, Amazon entered the Europe targeting 2 largest online market Germany and UK for
selling books online through its US “Great big Fast” strategy. It acquired 2 big online book
retails one from UK and one from Germany and relaunched them as Amazon domain. In
1992 Amazon started offering much more than books, music and by 2002 more products
were lined up. Despite other e-commerce retailers Amazon UK and Germany managed to
get a revenue of $167.7 million with a customer base of over one million. By 2000 Amazon
entered France as well setting up the website and warehouse from scratch.

They faced several challenges that led to operational and organizational changes than from
their US strategies
 Cultural differences
 Customer Expectations- Amazon understood that worldwide, customers want a
better service, better product selection and wide range and brought international
expansion but honoring local customs.
 Selling Regulations- To comply the local book retails could not sell the book for a
lesser price mentioned as MRP. To keep their market position, Amazon introduced
free shipping and few promotional activities in 2001.
 Payment options- As all the 3 countries had different payment method, they
provided options like cheques for French and postal orders for German customers.
 Procurement and supply strategy- They had completely different supplier market
here and so they relied on local small wholesale suppliers to fulfil the orders. Thus,
they established relationships with numerous publishers and distributors. The
information for the inventory was shared through EDI (electronic data interchange).
 Managing on time delivery- Amazon relied on national postal service in Europe to
deliver its domestic and international orders. The NPS offered one day deliveries in
big cities. But due to local carriers there was delay in delivery or lost orders due to
which Amazon could not decrease its shipping cost.

I recommend that amazon should integrate its European operations as a whole and accept it
as a single market. The below recommendations require a radical change in their operations
and organizational strategies one that is different from US market.

 Build integrated strategy for European market, analyze demand patterns,

transportation cost, DC (distribution centers) capabilities, inventory cost, ownership
of the product, wide range available at DC, analyze past data and minimize the gap.
 Strengthen the UK's purchasing team. The UK procurement team should be
responsible for the entire EU network. Purchasing large volumes of goods will give a
negotiation power to Amazon. In addition, it is a good decision to switch to the ERP
system and increasing usage of EDI electronic data interchange so that the EDN
system can progress in a stream. 2.
 Keep these 3 DCs, support them with EDN.
 Selecting appropriate DC to fulfill orders. Keeping the right inventory, at the right
amount. Although these three DCs are geographically positioned, they are still
suitable for our strategic planning. With a strong purchasing team and a strong
 central decision-making unit, DCs will keep the right inventory in the right amount,
avoiding unnecessary cost of inventory.
 Increasing the use of drop shipping, B2C. Drop Shipping should be applied in all
product groups that can be implemented considering the details such as delivery
time and transportation cost. The inventory load of DCs will be reduced. With more
use of B2C systems, the delivery time will be shortened, and customer satisfaction
will increase.