How would Amazon’s entry into the Polish market affect the last-mile sector? There are implications for Poczta Polska, InPost and the whole sector, says Marek Różycki from Last Mile Experts.
Poland is the largest CEE market and has demonstrated robust GDP growth over the last few years, a trend which is generally expected to continue despite the economic slowdown. The Polish e-commerce market is expected to exceed €9bn (US$9.9bn) at the end of 2019 and to show double-digit annual growth to 2023. Poland is ranked among the fastest developing e-commerce markets in the world and e-commerce currently accounts for some 7% of retail sales – a figure that is expected to grow.
Competition in Polish e-commerce is interesting. The key player, Allegro.pl, has over 40% market share. Initially established as an auction platform, over the last few years Allegro has expanded, offering its own retail lines as well as hosting a variety of business sellers. The company was successful in winning a dramatic ‘David vs Goliath’ battle with eBay some 15 years ago which left eBay on the fringes of Polish e-commerce. Just a few years ago Allegro was sold to a consortium of private equity firms for a staggering US$3.24bn.
Amazon has not taken on Allegro ‘head to head’ in the same manner as eBay did. The e-commerce behemoth has a large presence in Poland, where it operates several fulfilment centers, mainly serving Germany as well as an R&D center. For a few years now, Amazon has offered a Polish language site on its German platform. Both the above suggest entry with a fully-fledged Amazon operation is only a matter of time.
Like virtually all other European markets AliExpress is present but lags behind Allegro.pl or Amazon mainly due to poor delivery options. An interesting new development is the launch by Facebook of its Polish Marketplace, which is quickly gaining popularity, albeit from a low base.
Rumors have been rife that Amazon will enter the Polish market and we have now heard concrete suggestions that this entry is imminent – meaning within the next 12 months.
E-commerce and the last mile
So what will this mean in the last-mile space? Who will be the winners and who will be the losers?
Poland’s last mile is highly competitive. All major carriers are present, with the exception of Hermes. The CEP market is currently approaching €2bn (US2.2bn) and is expected to exceeded 500 million parcels.
Delivery is complicated by COD, which still accounts for over 40% of parcels.
Out of home is growing fast, initially powered by InPost (with some 5000 lockers in place, supported by a few thousand PUDOs). The post has been slow to develop out-of-home customer experience but is now working with SwipBox and Biedronka (largest discount store network) to support post office access points with lockers.
The latest development is that DPD Polska, the longstanding market leader in terms of volume, has been stripped of its leadership by InPost. This is largely due to InPost’s strong position with Allegro and other key e-commerce players. Interestingly, this is something I predicted would happen after the acquisition of Siodemka a few years ago… but that’s another story.
Amazon has several options for market entry. Given its existing market position and FC (fulfillment center) infrastructure, it could take the slower route and go for a green field. Alternatively, it could buy Allegro or its smaller albeit important rival Empik (a more traditional network supported by a strong bricks and mortar presence).
Either option will have important ramifications for the last mile, partly dependent upon whether Amazon sets up Amazon Logistics, or uses third parties to support its last-mile deliveries.
Looking at the latest trends in other European markets, our assessment is that Amazon Logistics will start operating in Poland, the only question is whether this will be a green field or whether it will involve the purchase of InPost. (Geis, formerly KEX, the only other independent nationwide network with a home delivery capability, was recently closed.)
Now this is where InPost’s shareholders are sitting pretty. Because Allegro didn’t see fit to maintain its own last-mile capability and did not keep its ‘in house’ courier broker (Sendit), it is largely dependent on that carrier due to its unique locker coverage and increasingly effective to-door service. Because SwipBox’s network is still very small compared to InPost’s, this means that, unless Amazon buys Allegro itself, Allegro simply cannot afford to allow Amazon to buy InPost.
Looking further afield, Polish Post (Poczta Polska) has done much to improve its customer experience over recent years, but is still a far cry from what the independent carriers are offering. Unless they go for a carrier agonistic model using their strong infrastructural presence, they will not benefit significantly from Amazon’s entry. Similarly UPS, FedEx and GLS offer a relatively poor B2C customer experience (mainly due to a lack of suitable IDM software and out-of-home options) when compared to InPost or DPD.
DPD is in an interesting position. It has lost its premier position in the market and has been slower than InPost to develop out-of-home capability. They will, no doubt, benefit tactically from any Amazon entry but unless they move fast to further improve their out-of-home capabilities and fine tune their ‘to-door’ systems to the level of their sister company, DPD UK, they will not win in the long run.
Time will tell how things finally turn out… but we can expect a very interesting few years in the Polish e-commerce and last-mile environments.