How Is Amazon able to uproot the local online marketplaces all over the world?

Rising over the Local online marketplaces had been something that marketplace giants have always found very hard to crack. But for the past few years, this deadlock now seems to be on the verge of breaking. And guess who has been able to do so? Not the oldest online marketplace eBay, nor the global wholesale giant Walmart but it has been none other than Amazon.

As of today, Amazon has successfully launched its regional marketplaces in 20 countries including the United States, Canada, Mexico, United Kingdom, Germany, France, Italy, Spain, Japan, Singapore, United Arab Emirates, Brazil, Australia, India, Netherlands, Saudi Arabia, Turkey, Sweden, Poland, and Belgium.

Among these 20 mentioned names some of the countries like the Netherlands, Saudi Arabia, UAE, etc seemed impossible where there was a sheer dominance of regional marketplaces.

Now a very big question stands - How is Amazon doing so?

There can be two explanations that answer the above question about Amazon’s conquest. Well here are the two reasons:

1. Tie-Ups and Acquisitions with the regional leaders
2. Direct Head on Competition with the Conglomerate

Now let us discuss each of them in detail.

Amazon’s Tie-Ups and Acquisition Strategy:

As the name suggests the Tie-Up strategy of Amazon is simply targeting a small region on the globe and establishing relations with one of the regional marketplaces. Amazon usually aims for a marketplace that has been around for a while and gives less thought on the fact of how that marketplace is performing right now.

There are two simple factors that Amazon benefits amazon in convincing the regional marketplace to tie up:

• FBA - The fulfillment service offered by Amazon
• The reputation - Since Amazon has already made a name for itself on a global level by bagging the US market which is considered to be the most competitive of all.

It also becomes easier for regional marketplace when they get such a nice delivery and fulfillment platform and the trust of the global eCommerce leader that has risen above all in the most competitive region in the world.

You must be thinking why I included the Acquisition strategy in the same heading.

Well, the Acquisition strategy is an advanced part of the tie-up strategy that Amazon uses. Once Amazon has made a name in the region and believes it can now withstand the ups and downs of the regional trends they advance to the next step which is Acquisition.

In Some cases (very few) the Acquisition stage comes before the tie-up but that’s only when a regional marketplace is really unstable or not able to earn trust among the customers.

Let me take an example with which the tie-up and Acquisition strategy will be more clear. Many marketplaces aimed at the Middle East region and were unable to succeed with the regional competition. Amazon started its Middle East venture with the takeover of the online retailer Souq.com for 580 million dollars in 2017. Such a big investment at that time seemed quite big compared to the return, but Amazon had planned big. Souq was just a gateway to entering into the Middle East market. Within 5 years Amazon has rebranded Souq.com and launched its marketplace in the United Arab Emirates, and Saudi Arabia and is also planning to expand soon in Egypt and other connected regions.

Direct Head on Competition with the Conglomerate

The 2nd strategy that Amazon uses is the Direct Competition strategy. This strategy is more effective in regions where a large chunk of the audience still are on the offline or traditional way of selling. Regions where local markets are still a great deal.

Here Amazon follows a different sort of promotional campaign which is persuading customers to switch to an online medium of sales. And since establishing an online presence in such a region is not much of a hassle compared to any regional market there Amazon has the resources to do it better. And once established, when the customer turns up Amazon is already there to serve.

A good example of such a region is India. Amazon made its inception just after regional marketplaces such as Flipkart and SnapDeal started. Amazon established full-fledged FBA centers and started catering to the audience by presenting much better deals compared to the current competitors. Within a few years when the major transition from offline to online happened in the region none other remained other than Amazon emerged as the first choice marketplace in the region.

Does this expansion of Amazon good for Sellers?

Amazon itself is turning out to be a multichannel platform and for a seller, let us say a Magento-based seller starts a new selling campaign that connects its store with only Amazon based Marketplaces using a multichannel Integration, it will be sufficient for them to cover a big geographic location.

So the answer is YES it will be good for sellers and obviously customers as well.

Final Words:

How to eliminate competition and how to break through the regional eCommerce barriers is something Amazon knows very well. And due to this Amazon has and currently is successfully able to uproot the local online marketplaces all over the world.

I hope you liked what you read.

Share your thoughts in the comments.