Amazon’s Tricky Overseas Expansion

Amazon’s overseas expansion into Europe has already hit a snag. Amazon’s emergence into the market was putting pressure on Europe’s postal firms, but now it’s been announced that the e-Commerce giant is dropping same-day delivery in the U.K.

Cyber Monday is what has been cited as the reason Amazon has had to suspend its same-day delivery options. The Register broke down the math of Amazon traffic: “The frenzy was equally intense online, with Amazon flogging about 64 items per second to achieve a mammoth 5.5 million sales — the most it has ever racked up in 24 hours across Blighty.”

That lead Amazon to stop next-day deliveries without much of an explanation when customers began to question the change.

“Due to some high volume of orders in this Christmas season, delivery time frame is being extended for some in demand items,” The Register cited from a reader’s response from an Amazon representative. “I’m very sorry about this. Next day delivery will probably not resume until January 2015.”

Following customer reports, here’s how Amazon responded to the Register: “As a result of the unprecedented number of orders we received during Black Friday Deals Week, some deliveries will take a little longer than you would normally expect. We advise customers to check the estimated delivery date on the “Review Your Order” page during checkout for details of when they can expect their order to arrive. We expect usual service to resume in the next few days.”

Black Friday was another big rush for Amazon in Europe. Xavier Garambois, vice-president of EU retail at Amazon, was shocked by the sales. “Ever since we introduced Black Friday to the UK in 2010, sales have increased year-on-year but this year really has surpassed all of our expectations,” he told the Register.

The two retail holidays are only getting more popular in Europe, particularly because of company’s giving global expansion more attention.

“Black Friday and Cyber Monday are increasingly influencing EU online shopping, particularly in the UK,” according to Forrester Research Analyst Michelle Beeson. “These traditionally US sales days may seem irrelevant now, but retail heavyweights like Apple and Amazon have a track record of influencing consumer behavior and setting new standards in Europe.”

Before the holiday rush, Amazon was already putting pressure on European postal firms. It’s unknown how these new delivery issues will impact Amazon’s e-Commerce presence in Europe, but Amazon has already made a dent into the market.

According to Reuters’ article, postal firms still need to slash costs and make investments in new technologies and services to compete with services like Amazon. This may be a particularly difficult transition for the old-school, traditional postal firm models that are already working on smaller staffs. Some companies may be shielded from Amazon, while others are a long way off the mark.

“Companies such as Deutsche Post, whose DHL arm already offers a range of services including help with local duties and red tape on international deliveries, are best placed to cope, according to analysts,” Reuters reported. “Those such as Britain’s Royal Mail and Belgium’s Bpost that are more focused on parcels and local markets, however, have much more to do, they added.”

Online shopping was initially thought to give a boost to postal firms, but as Amazon has swept in to tackle deliveries on their own, it leaves the European privatized mail systems needing to change to compete. Outside of the holiday season rush that has proven difficult for Amazon, delivery remains a fierce competition. Services like Royal Mail recently saw a 13 percent traffic decrease and Amazon’s attempt to capture more deliveries could cut the company’s revenue growth by half, Reuters reported.

Shares in other European delivery services — PostNL, TNT Express and UK Mail — has also dropped 20-30 percent in the year. Edmund Shing, global equity fund manager at BCS Asset Management, told Reuters those are the firms who have their work ahead of them.

“Before becoming positive on the sector, I would like to see them making efforts to improve productivity, adopt technologies like softwares to optimize logistics networks, cut labor costs and have a sustainable dividend policy,” he told Reuters. “It’s a very competitive market, growth prospects are limited and the barrier to entry is not very high. The danger for the market is that Amazon might replicate its experiment across Europe and other online companies such as eBay also launch their own delivery services to cut costs.”