OPINION: Sweden is a real catch for Amazon – but is the feeling mutual?

From The Local's archive: As Sweden is wooed by Amazon and faces its retail Waterloo, Scandinavia should spurn the global superpower, writes tech entrepreneur Sïmon Saneback.

OPINION: Sweden is a real catch for Amazon – but is the feeling mutual?
Tech entrepreneur Sïmon Saneback. Photo: Annika Derwinger Falkuggla

Opinion piece first published on September 23rd, 2020.

Jovially dubbed 'Project Dancing Queen', retail superpower Amazon's entry into the small nation of Sweden will happen soon, and just as the country's mid-pandemic economy is at its most vulnerable. After a long flirtation with the e-commerce giant, Sweden will finally face its Waterloo – as Amazon attempts to forever change its retail market – potentially sweeping department stores and medium retailers off their feet. 

Amazon seems to be serious: a hidden test-site for its Swedish portal was accidentally discovered by a Finnish developer, with a launch tipped to be Amazon Prime Day, if not sooner. Sweden's retailers may understandably tremble, given Amazon's clout. With its worth equivalent to the GDP of New Zealand, it might seem as if a privatised state were poised to invade – indeed the move has attracted intense criticism, particularly from left-leaning commentators. 

A gateway into Scandinavia, Sweden would be a real catch for Amazon. Something of a Trojan Horse, could shake the entire Nordic market with its low prices and high standards of customer care. Nordic culture is quite Americanised and it would not be surprising if, in a few years, Amazon's ecosystem becomes part of common life – catching up with the eight in ten American households signed up to Amazon Prime.

This will also bring much-needed competitiveness to Scandinavia, widening access for retailers, which will greatly appeal to consumers. In Sweden, particularly, Amazon could cause a stir by offering alternatives to the mostly Swedish or Nordic brands on the shelves. It could break up Sweden's oligopoly of powerful local families, which tightly controls the retail market and limits entrance from outsiders. 

A warehouse in Eskilstuna, which rumours say is set to house Amazon in Sweden. Photo: Fredrik Sandberg/TT

Yet, Sweden represents one of Amazon's biggest challenges – managing huge resources in a small nation, a new language and currency, and the effect of Sweden's relatively high 25 percent VAT on prices. The Titan-like status of Amazon makes it easy to forget that in some other areas, like China and much of Europe, its overtures have been less than successful.

Another retail giant, Apple, tried – and failed – to settle in Stockholm, after buying premises for 129 million kronor ($14.6 million). The proposed flagship store was rejected by the local authorities in 2016 – officially to protect Kungsträdgården Park, but commercial interests may also have been at stake. A restaurant now rents the space from Apple, which has now severed ties with the city.

To its favour, Amazon is fairly well-acquainted with the Swedes, who are not generally enamoured of giant marketplaces ( being another big name that has bowed out). Amazon mainly sells in Sweden through its German portal, with often eye-watering shipping costs. It competes with Swedish platforms like Elgiganten, with profits already in excess of 1 billion kronor. With Amazon's profile relatively low in Sweden, it could try to buy out at least one large Swedish e-commerce store in a bid to gain footing.

But rather than marketplaces, Sweden's unique direct-to-customer brands, often selling in sports and fashion, seem to fare better with its citizens. Amazon needs its medium and large players, in order to attract third-party sellers, which represent around 40 percent of its reseller revenue. So far in Sweden, there has been limited big-name interest in marketplaces and the concept has mostly been associated with local niche players such as CDON and Fyndiq. Elgiganten, for example, has one major IT retailer on its marketplace, Inet, which suggests Amazon might stumble here.

Will Amazon be successful in Sweden? Photo: Helena Landstedt/TT

Alternatively, Amazon will likely thrive in its irresistible opportunity for smaller Swedish retailers. Potentially, its power in reaching out to consumers will make opting-out unfeasible. It relies on low prices, alongside fast delivery, to attract cash-strapped customers, while squeezing profit margins for sellers. It reserves the right to set prices and fees through ever-changing algorithms, while prioritising its own products. As both platform and seller, it is the real winner.

Perseverance is, after all, Amazon's strength. While it thrives on long-term losses, its real interests are not in retail. Its true profits come from web hosting through its data cloud platform. Amazon registered its Web Services Stockholm in 2010, with sales of 907.5 million kronor in 2019. Its national profile is also boosted by Audible and Amazon Prime Video, amid the success of Storytel, Netflix, HBO Nordic as well as the recently launched Disney+. Swedish retailers might only dream of operating on a level playing field. There are stark choices: join, adjust, or get left behind. Even Ikea has made a groundbreaking deal with Amazon.

Friction, meanwhile, will result from Amazon's distaste for strong trade unions. Amazon, notorious for its unforgiving warehouse working conditions, seems unlikely to respect trade union rights. And Sweden is a nation that proudly protects the rights of employees. In 1995, for example, Toys'R'Us was blockaded into entering a collective agreement. With Sweden's trade union movement firmly opposed to Amazon and the enormous political pressure the authorities are under, a similar stand-off is expected.

Danish trade unionists have also expressed alarm. The Association for Danish Internet Trade (FDIH) points towards the Swedish tax breaks granted to Facebook, in exchange for the company creating new jobs, very few of which materialised. As Amazon beckons, the organisation warns of favourable and competition-distorting conditions. In anticipation of this threat, it could follow in the footsteps of other Scandinavian organisations in joining forces with a fellow employers' association, Dansk Erhverv.   

It is clear that an Amazon revolution could irrevocably harm Sweden's retail landscape. The Swedish labour market is preparing itself to resist the onslaught of PR campaigns and mounting political pressure from the retail superpower. We should all ask ourselves whether 'healthy competition' is really what it seems. Will it mean the winner really takes it all – as chunks of Swedish profit margin disappear into the pockets of Jeff Bezos? 

Sïmon Saneback is an award-winning tech entrepreneur with experience in e-commerce and a frequent keynote speaker around Europe. He is a founding partner of Wellstreet, a Stockholm-based venture capital firm, and has been part of the Advisory Board for Klarna, Bambuser, PostNord, Bring (Posten Norge), OKQ8 and Hemtex, among others.

Member comments

  1. “Nordic culture is quite Americanised”. I came from a place very americanised, São Paulo, Brazil. I can garantee that Nordic culture is far away to be americanised and IT IS THE BEST OF THIS REGION!

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Gothenburg: is the dream of a new city turning into a nightmare? 

Sweden’s second city is the site of Scandinavia’s largest urban development project. But there is rising concern that the costs outweigh the benefits, says David Crouch

Gothenburg: is the dream of a new city turning into a nightmare? 

Last week, residents in the area of Fågelsången (birdsong), a quiet street at the very heart of Sweden’s second city, woke up to read the following news: “Explosions at Fågelsången: On August 8, week 32, we start blasting around Fågelsången and are expected to be done by week 40. When blasting, for safety reasons, no one is allowed to go out, open their windows or be within the blasting area. We will work weekdays 7am to 5pm.” 

Blasting deep holes in the granite – along with sprawling roadworks – has been the reality for central Gothenburgers for the past four years, as a vast rail tunnel is being dug to link the current terminus with other parts of the city and enable smoother connections with other routes. The aim is to triple rail passenger numbers and eliminate traffic jams on the main road through the city, at a cost of 20 billion crowns (€1.9 billion).

This railway, known as Västlänken (the West Link), is not the only big construction project in the city centre. It is just the largest element in a gigantic scheme to revive the docks area along the river, which was destroyed by a global shipping crisis in the 1970s. The great rusting cranes opposite the opera house and the disused Eriksberg gantry are an important aspect of Gothenburg’s skyline and self-image. The areas on the north bank were also home to many recent immigrants and a byword for poverty. The city’s mayor famously, and shamefully, referred to it as “the Gaza strip”.

So in 2012 the city launched an ambitious plan. Christened Älvstaden, the RiverCity, municipal investment aimed to build an attractive, modern waterfront while creating tens of thousands of homes and jobs. It is by far the Nordic region’s biggest urban regeneration project. A YouTube video commissioned by the city authorities a few years later neatly sums up both the breathtaking scope of this vision and the exciting / brutal (choose your own adjective here) nature of the transformation it would bring: 

The RiverCity revolved around two flagship projects: a new bridge over the river, the Hisingsbron (Hisingen Bridge), combined with major new office developments right in the centre; and Karlatornet, Sweden’s tallest skyscraper, which would literally tower over Gothenburg like a beacon of modernity in a city that traditionally has had strict rules against high-rise buildings. 

Add to all this a proposed high-speed rail link with Stockholm, and you have a recipe for quite spectacular urban upheaval involving billions of tons of steel and concrete. Visit Gothenburg today and much of the city seems to have been turned into a building site. There is a forest of cranes, while smart new office blocks puncture the skyline – a genuine metamorphosis is under way.

But many Gothenburgers are either uneasy or downright unhappy. The RiverCity is a vanity project to gentrify the docklands, they say. Karlatornet’s 73 stories of luxury apartments will be a scar on the landscape and a symbol of Gothenburg’s new love affair with finance and real estate, a slap in the face for the city’s proud industrial values. Västlänken is a vit elefant, a costly project that will deliver questionable benefits, many believe.  

Opposition to Västlänken was such that a new political party, the Democrats, took 17 percent of the vote in 2018 with its headline demand to stop the project immediately. This caused a revolution in local politics, overturning decades of Social Democrat rule. 

And now the gloss on these big-ticket construction projects is starting to fade. Karlatornet was the first to run into trouble. For most of 2020 building work was at a standstill, raising the threat that this flagship of regeneration would be nothing more than an unfinished stump, after American financiers pulled out of the project. The new Hisingen Bridge is open to traffic, but its construction was fraught with setbacks and the final cost to the taxpayer is still unknown. “There has been an awareness from the start that this was a high-risk project,” one of the project’s bosses said ominously this spring.

RiverCity is more than two billion kronor over budget, and facing accusations of mismanagement that evoke Gothenburg’s old nickname of Muteborg, or Bribetown, after a proliferation of municipal companies in the 1970s led to conflicts of interest, with politicians sitting on company boards. Opponents of the scheme argue that in any case it is unlikely to solve any of the city’s fundamental problems, such as the ethnic segregation that has created immigrant ghettos in outlying suburbs.  

In May, Swedish newspaper Dagens Nyheter published leaked minutes from Västlänken management meetings in which one of the main contractors on the project said it would be delivered billions over budget and four years later than its official 2026 deadline – in other words, four more years of earth-shattering explosions, roadblocks and associated upheaval. With local elections only months away, the Democrats have taken out advertisements on billboards and in local media demanding that top politicians tell the truth about what is going on. For opponents of the scheme, this is exactly what they have warned of all along

Next June, Gothenburg will officially celebrate its 400th anniversary, postponed from 2021 because of the pandemic. Visitors will experience a city on the move, with pristine new motorways and sparkling office blocks. So for Gothenburg’s urban planners, there is light at the end of the development tunnel. In the case of Västlänken, however, they will be hoping that the light is indeed that of an oncoming train. 

David Crouch has lived in Gothenburg for nine years. He is the author of Almost Perfekt: How Sweden Works and What Can We Learn From It, a freelance journalist and lecturer in journalism at Gothenburg University.