Amazon is getting ready – this is how they will take on Sweden

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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on September 19th, 2021.

The start was a failure for the e-commerce giant. But as a new, secret, big owner in the last mile company Airmee, Amazon seems determined to try to take the Swedish market. The deal creates challenges for the other companies – and perhaps also for Airmee.

Tobias Lutke, founder and CEO of the e-commerce platform Shopify, followed the opening of the Nasdaq stock exchange on January 13 this year. At 09.30 Lutke would become extremely wealthy. Or rather – even more wealthy than he already was.

However, the company being listed on the stock exchange was not Shopify. That listing had taken place six years earlier. This time it was the payment company Affirm’s turn. When the bell rang at the end of the stock market day, Lutke’s company Shopify suddenly had shares in Affirm worth about two billion dollars. When Shopify reported its first-quarter earnings, the money from Affirm’s listing accounted for more than 100 percent of its quarterly profits.

It is one of several examples of a trend that has emerged where strategic partnerships are made with co-ownership as a component of the business.

In the case of Shopify and Affirm, it was a partnership that was made six months earlier. Affirm, which can simply be described as an American Klarna, was given the exclusivity to offer “buy now, pay later” in Shopify’s 1.7 million e-commerce stores. As part of the deal, Shopify was given stock options to buy more than 20 million shares in Affirm. Shares that at the stock exchange listing became very valuable.

You can find similar setups around the world. A few weeks ago, Microsoft invested five million dollars in the Indian hotel chain Oyo. It may sound like a lot, but the valuation of Oyo is $9.6 billion. It is therefore not an investment that will finance the company, it is rather a matter of getting Oyo to start using Microsoft’s cloud service Azure to a greater extent. Microsoft – which here competes with Amazon AWS and Google Cloud, among others – has listed the cloud services within Azure as strategically important and one of the company’s major growth areas.

It is therefore noteworthy that the Swedish last mile delivery company Airmee, according to Di Digital, issued option rights to a new, unknown owner for the equivalent of 20 percent of the company. And after the company itself announced that it will have Amazon as a customer, it’s not a bold guess as to who the new owner is.

Amazon’s start in Sweden has been slow and their launch got laughed at by both customers and competitors. Clumsy automatic translations meant that you can now use Amazon in Sweden with English as the language instead. But more than anything else, Swedish Amazon lacked the engine for its entire business – the Prime membership programme.

It provides, among other things, the opportunity to get fast home deliveries at no extra cost. But to be able to offer it, you need a logistics company that can handle so-called “last mile delivery” – companies such as Airmee that can take the product all the way home to the customer’s front door. Amazon’s current logistics partner – Postnord – does also has this service. But just having one supplier for deliveries will not be enough for Amazon.

Should one, therefore, just before the anniversary of Amazon’s launch in Sweden, see this as some sort of fresh start? One where delivery times start to match the picky and e-commerce-savvy Swedes? And which will probably get bundled with the video service Prime Video which was launched in Sweden separately? Yes, probably.

But if the price of landing a strategically important partner is to let them in on the cap table, then the selection of that partner is more important than ever. Partnerships can come and go – but shareholders you will have to live with for a long time after that.

In addition, other customers may have opinions about them now indirectly benefiting one of their competitors. If you, like Airmee, are a supplier to many different e-retailers, this can be a difficult strategic nut to crack. Having a customer like Amazon can tenfold the size of the company. But having a shareholder like Amazon could also make your other customers look around for a new logistics partner.

This column was first published in SvD Näringsliv, in Swedish, on September 19th, 2021.

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