A recent report by analysis firm Credit Suisse predicted that Inditex, the Spanish multinational that owns the Zara brand, would end up selling its garments on Zalando, a German marketplace. The report foresaw that the same would happen with another important European textile giant, H&M. It would be, according to Credit Suisse, not only a logical step but also a necessary one in the face of how rapidly physical commerce is evolving, which is in a sharp decline that has been accelerated by the pandemic.
Zara has already been betting on its own ecommerce, Zara.com, where it seems to be achieving the usual efficiency that characterizes Inditex. In 2019 online sales accounted for 14% of their billing, and their goal is to reach 25% in 2022. But that growth might not be enough.
Are all brands, even the strongest, like Zara, condemned to diversify their points of sale by betting on these marketplaces? A priori, it will be the consumer who ends up deciding. As long as free market rules are respected and everyone plays by the same rules, there’s not much to be said.
But the debate becomes more complex if the market for marketplaces itself is analysed. Zalando may be a success story, but if we talk about marketplaces, it is necessary to talk about two companies that are among the ten most valuable in the world by market capitalisation. And, uh oh, neither of them are European.
We’re talking about Amazon and Alibaba, the latter with their AliExpress marketplace that dominates the Chinese market, the world’s largest by volume, with 800 million online buyers. In the West, that role is Amazon’s, which is directly present in 18 countries, among them the leading EU markets. In 2020 it opened in two new European countries, the Netherlands and Sweden. But its biggest strength is in the United States, where it has a market share of 38.7% according to the consulting firm eMarketer.
Regarding the EU, Amazon has little competition from other marketplaces in Italy and Spain, while in countries such as France – a country with very strong retail companies – as well as the Netherlands and Poland, the market is more competitive.
The positive and negative about Amazon
Many SMEs gain access to new markets thanks to Amazon’s distribution channel. They sell more, they internationalise, they grow. This fact, repeated again and again by the US company itself, is true, just as true as the fact that companies using Amazon know they must subject themselves to the marketplace’s strict rules, which penalize any error or bad review. Amazon gives opportunities, but puts a very high price on them. And all with that ‘algorithmic opacity’ so characteristic of the ‘big tech’ domain. Amazon acts like a judge who applies a criminal code only he has access to.
Not to mention the possibility that once a product they are distributing has been successful, Amazon uses the information to launch its own alternative. If sellers say they get a bad feeling, there’s good reason. Last November, the European Commission accused Amazon of abusive use of the data it obtains from other companies using the platform, with the aim of selling its own products. “We must ensure that the dual role of platforms with market power, such as Amazon, does not distort competition”, said Commission Vice President Margrethe Vestager at the time.
Therefore, perhaps the question is not whether to bet on ecommerce itself or on a marketplace, or on zara.com or a Zalando. The key is in the rules of the game. If a player gains too much power, it becomes a danger. And we fear that is exactly what’s happening with Amazon.