You may remember 2008, we were all living through a global crisis. The economy was collapsing and retailers all over were being hit hard by a combination of online competition, rising costs, and the fall in consumer spending. Walk the highstreets each day and you would see a shop going out of business. There was a gloomy atmosphere. It was imperative for business to become creative, reformulate their strategy and adapt to the circumstances if they were to survive.
I started my journey in ecommerce back in 2008, while working for a small shoe retailer in central London. One morning, I overheard a conversation between our shop’s owner and our warehouse manager, where they discussed whether they should shut down the warehouse and move the stock to the shops or move the warehouse to a new location further away from central London, where rents are exorbitantly high. Whatever their decision, they would have to sacrifice the business in some way.
The warehouse supplied 2 shops, not far away. It played an important role for the business because the shops were small and every day they had to be replenished with the most popular sizes to ensure best service to our customers. Having the warehouse nearby allowed us to do this quickly and efficiently. At times, our staff would literally run to the warehouse to pick up a size that was missing in the store if we had a customer willing to buy. Without the warehouse nearby, we would be risking losing some sales.
But obviously the survival of the warehouse depended on the cash flow from the shops. With the decline in foot traffic, many highstreet shops were closing down. Our business felt it. And with less customers walking into our own stores, not only our warehouse but the whole business was under a serious threat. So the question that permeated the shop’s owner was: how to generate that extra cash with the least investment possible?
My idea was to turn the warehouse into a shop. The warehouse was located under the rail lines of Camden Town, off the highstreet. It certainly wasn’t a good spot for opening a shop. So I suggested to management we opened an account on eBay and started selling our goods online instead. We could add an extra computer and the warehouse would become the center of operations for all our online activities.
Needless to say the business owner, my boss, was skeptical at the beginning. He had one of our recently hired interns to start this venture, just to check if the idea would stir up some extra sales. The few hours he worked quickly grew into a full time job and the idea of selling online finally took off. We cleaned up a little room in our warehouse, moved in a few desks and computers and our online office was officially inaugurated.
I didn’t understand it at the time but the downturn of the economy was making online sales skyrocket. Customers all over had turned into online purchases, looking for better pricing and free shipping. So marketplaces like eBay and Amazon suddenly gained thousands of new sellers each day. Does it sound familiar?
Amazon inaugurated their UK website in 1998, and slowly opened new categories over the years, allowing for more sellers to enroll. The fashion category opened in 2007, so when the crisis hit in 2008, many fashion retailers like ours joined the marketplace. That’s where my experience with Amazon began.
I joined the online team to look after the recently started Amazon Seller Central account. Since eBay was doing so well, they figured that Amazon could be another sales channel adding to the gross revenue generated through online sales. Up until that point, I had never sold a single product on Amazon. I had to learn everything from scratch, so I put on my student hat and rolled my sleeves. I began asking questions like how to list the products? How do I manage inventory? And began studying Amazon’s metrics in detail. It was very daunting in the beginning, but soon I started to see the fruits of my work, especially after my very first sale: a pair of Fred Perry sneakers.
2008 was tough for all business, no doubt about that. At the end of that year our little online office was responsible for more than half of the company’s turnover, with Amazon counting for more than 60% of the total revenue generated from online sales. Most importantly, we are still in business and didn’t have to relocate or shut down our warehouse.
Since then, my career evolved and Amazon remained a constant. Every single ecommerce business I managed since 2008 had some level of relationship with Amazon.
First because I think it’s important to get to know the people behind AMZ Paragon. Anyone can open and run an online shop these days, but experience does go the extra mile. In times of uncertainty, experience can enlighten the ways of adaptation far more quickly.
Secondly because my story has many similarities with our current situation. Fast forward to 2020 and here we are once again in the midst of a global crisis. My story serves as an example to brands, distributors and retailers who still have not understood the importance of an online strategy. In particular regarding online marketplaces.
Despite being different in nature, the crisis brought by the Coronavirus pandemic will permanently reshape the retail landscape on a global scale just like the financial crisis did in 2008. The growth of e-commerce is going to accelerate this year more than previous years. Websites will see a growth in traffic and revenue but inevitably online marketplaces will come up on top. With piles of cash, extensive delivery networks and massive physical footprints to navigate the pandemic, the biggest online retailers are raking in sales. Amazon among them.
During the current crisis, Amazon’s sales for items deemed essential, like basic hygiene items and some medications, have spiked. Overall, customer spending on Amazon is 35% up. After the acquisition of Whole Foods Market, Amazon’s grocery category had been slow to take off until now. Suddenly it’s wildly popular and customers are fighting to grab open delivery windows. Amazon and Walmart are hiring a combined 250,000 workers to keep up with demand. All this data from the US market alone. Amazon is even profiting from our heightened dependence on internet connectivity and streaming entertainment, through Amazon Web Services and Prime Video.
On the other side, small businesses are bleeding out. Expect to see a whole bunch of middle and small sized retailers finally dropping the towel. At the end of this crisis, giants like Amazon will have become even stronger juggernauts while the smaller players faded away. I honestly wish I could tell a different story but the reality is this: you adapt or you wither.
There are a couple of attitudes we could have before facing such reality: we could cross our arms and expect governments to step in and enforce more antitrust regulations to prevent such competitive disadvantage in the future. While this may look like a good long term plan, it won’t free us from the immediate challenges. Or we could somehow try to work along these giants and use their growth to our advantage.
We created AMZ Paragon to help with the latter. We believe moments of crisis are not all about setbacks. It also brings moments of opportunity.