Amazon is about to enter the Danish market for the first time and it will be interesting to see if they can emulate the success they have had in other countries. There are a couple of reasons to think the Danish market might be a tough nut for Amazon to crack.
Firstly the Scandinavian countries are early adopters of technology and the online retail sales market is more mature with 23% of all retail sales online against just 10% in the US. This has meant that Danish retailers have developed their own online businesses with Danish consumer’s buying habits already established.
In the US, Amazon is the market leader for online sales with 50% of all sales. In the UK and Germany they are also market leaders with a 33% market share. It is hard to imagine they can achieve this level of market share in the more mature Danish online retail market.
Secondly, there is a clash of values between the Danish and the Americans. As a generalisation Danish people stand strongly behind the environment, human rights, employment law, an equal society and look for high living standards. This is reflected in the wealth gap (the wealth gap is the gap between the richest 10% and the poorest 10%) that is considerably lower than the US. This clash in values might be reflected in Danish consumers supporting their domestic online retailers and being more reluctant to switch buying habits to Amazon.
The UK is in the middle of a retail crisis. The Centre for Retail Research said that 2018 was the worst year for shops since 2008 with over 56,000 retail jobs lost. High street stores are struggling to compete with the lower pricing of online retailers. UK high street retailers have argued that there needs to be a change in the tax laws to make a level playing field between the high street and online retailers. They have called for an ‘online’ sales tax to reflect the business rates (tax) that high street stores have to pay.
Amazon is also paying a lower corporate tax rate than other retailers. John Lewis has a similar market share in the retail market and paid nearly £100m in corporation tax in 2017 against just £4.5m from Amazon. John Lewis also pays business rates on its stores, with the Oxford Street store paying £10.5m in 2017, more than the entire corporate tax paid by Amazon.
Amazon has paid a lower tax rate based on its multinational status. It allows Amazon to undercut other online retailers and high street stores and gain market share. If this trend continues, we will see Amazon continuing to gain market share and the UK tax collect from the retail market falling sharply.
We should watch to see how the Danish market responds to the entry of Amazon to their retail market. It is questionable whether the Danish consumer will switch buying habits and whether the Danish regulators will tolerate a tax fall from the retail sector.
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Von: Rebel Economics Antworten an: Rebel Economics Datum: Freitag, 18. Januar 2019 um 15:11 An: Betreff: [New post] Can Amazon thrive in Denmark?
jenny.middleton@gmail.com posted: ” Amazon is about to enter the Danish market for the first time and it will be interesting to see if they can emulate the success they have had in other countries. There are a couple of reasons to think the Danish market might be a tough nut for Amazon to “
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All great points, however, I believe rational consumers will choose the lower cost option when presented with a choice. Whether Amazon is able to achieve this remains to be seen, somewhat. I’d find it hard to imagine Amazon would be subject to a different regime than incumbent online (or offline) retailers (that wouldn’t be particularly egalitarian of a nation that prides itself on this). I’d gamble on the broader forces of globalization overcoming any nationalistic endeavors in the long run (even if masked by the guise of cultural protectionism).
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I think as long as Amazon is the easiest and most convenient retailer to use people will mostly choose Amazon as the easy option, unless they have an incentive not to use Amazon, similar to the plastic bag charge which seems to have worked on many people. I personally prefer bookshops as places to visit rather than an online marketplace. Starbucks has never worked in Italy which could be due to a local cultural influence and the many small bars. This could happen in Denmark too and let’s hope it does!
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Excellent analysis, Jenny. I hope the Danes resist the allure of Amazon, and that the UK government removes its unfair tax advantages to level the playing field with its high street competitors. One thing you didn’t mention is Amazon’s poor treatment of its low-paid staff working in its “fulfilment centres”. I have met with many Directors of high street retailers. Generally, I think they want to be seen as part of the local community and want to treat their staff well – reflecting the values you identify of the Danes. US corporations such as Amazon don’t care if UK high streets and jobs are destroyed by their actions.
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