A tide of dread meets Amazon dawn

"Many retail businesses are going to become obsolete"

Knock, knock! It's Amazon. The world's largest online store opened for business in Spain on Thursday with a new site, www.amazon.es.

It's not that Spaniards couldn't buy things from other Amazon sites before - the internet knows no borders (only obstacles). But from now on it will be easier: everything is in Spanish, there is a large catalog of Spanish literature, music and film, and delivery will be faster, probably down to two days rather than five.

Customers will also stop getting unpleasant surprises in the form of surcharges by US customs on that package they ordered from the United States.

Amazon's quality (and prices) are going to shake up the weak national e-commerce sector, starting with the bookstores and music stores in the short run and later with many other products. The company, which started out selling nothing but paper books, even delivers bed mattresses these days. And now that we are used to getting nothing better in the mail than a traffic fine reduction for early payment, that Amazon package in the mailbox will brighten up the day for millions of homes.

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"Amazon's arrival is very positive because in Spain, the greatest barrier to e-commerce growth is a lack of trust," says Elena Gómez del Pozuelo, president of the Spanish Association of the Digital Economy (Adigital), which brings together most of the nation's online stores.

"To see reliable companies like Amazon and Zara online will make us mature. Amazon will bring better commercial practices that we can all learn from, just like retail clothing stores learned from Zara."

Ricardo Pérez, an expert in information systems and technology at the IE Business School in Madrid, says, "Business will grow for everyone; we're all going to buy more."

"Competition will make us better, more imaginative and more productive," adds Gómez.

"It will encourage excellence in service," says Xavier Solà, director of Casadellibro.com, the website of the Spanish bookstore, operational since 1995.

But encouraging commerce does not mean that there is no downside to all of this. Analysts and businesspeople agree that the impact of Amazon's arrival will be felt mostly by bookstores, both online and in the street. The timid responses seen so far are going to have to be more ambitious, Pérez advises the book sector.

"Amazon plays big. It's here to take over the market, not to play second fiddle. Those who have resisted so far can no longer afford to do so, considering its commercial aggressiveness.

"Amazon makes money because people buy more from it than from other sites; it has managed to create loyal customers who also buy things other than books," she says.

Pérez remembers a 1999 study she and colleagues conducted at Madrid business school Instituto de Empresa. "We ordered the same five books from 10 international bookstores; we received them and returned them. The best company in every way, from the number of mouse clicks to the time it took to get our money back, was Amazon. And it continues to be that way year after year, according to e-commerce studies in the US," she says.

Amazon did not invent things, it just did them well. In May 2001, the Spanish publisher Planeta opened a virtual bookstore called Veintinueve (or 29, after the number of letters in the Spanish alphabet). The venture lasted a year.

"It failed because there were no e-readers back then, just the computer, nor were there any attractive books," recalls Santos Palazzi, director of mass marketing and digital affairs for Planeta. "As publishers, we welcome anyone who helps us raise the visibility of titles and authors. Amazon will have well catalogued books, which is still a pending issue with Spanish online bookstores." And although Amazon will find a special obstacle in Spain in the fixed book price, "it will differentiate itself in service, with faster, free shipping." (In Spain, the 2007 Book Law established that publishers set the prices of books and that sellers may apply no more than a five percent discount on that. Grade school and high school text books are the only exceptions.)

"We already do that," explains Casa del Libro's Solà. "We've been preparing for years for the arrival of Amazon or Google. We have the largest catalogue in Spanish, with 1.6 million references and a search service for second-hand books. The online bookstore has the largest turnover in the entire chain."

But book sales are only the tip of the Amazon iceberg. "In the middle run we'll get used to buying all sorts of things," forecasts Pérez. According to the Telecommunications Market Commission, in the last quarter Spaniards spend two billion euros on the internet, mostly on trips and travel (30.7 percent), betting (4.9 percent), tickets for shows (4.1 percent) and clothing (3.5 percent). The problem with Spanish e-commerce, despite the fact that it is growing at a pace of 26 percent, is that the money goes abroad. In the other direction, only 311 million euros flows into Spain, although volume grew by 77 percent in the last quarter, perhaps because of the launch of Zara and Mango's online stores.

Inditex, their parent company, offers no business figures. Neither do Fnac or El Corte Inglés. "We provided them two years ago, realized that we were the only ones to do so, and we haven't done it again," said a spokesman for the latter. The department store's annual report says the following: "As for electronic commerce, El Corte Inglés is consolidating itself as a reference with over 103 million annual visits to its webpage, a 5.2-percent rise from the year before, and 2.9 million registered clients." Not a word about turnover or buying preferences, although the company has not stopped there: in April it opened a site called Primeriti, a private sales club. People who register get early alerts for special offers lasting between two and four days. The initiative is modeled after BuyVip, a successful program run by Amazon.

Yet the information policies of Spanish companies are a model of transparency compared with Amazon's. Not even Apple manages to be so opaque. There is no more jealously guarded secret than the number of Kindle readers being sold. It is also quite impossible to know how many books it sells, or how many movies or coffee machines for that matter. Overall, Amazon had a turnover of around 30 billion euros this year, as much as Inditex and El Corte Inglés together.

Antonio María Dávila, executive director of Spain's publisher federation (FGEE), has criticized Amazon's lack of transparency. "Its silence is a notable contrast to the Anglo style," he said. Ávila also expressed misgivings over the online giant's pricing strategies, and said it has been accused of selling books at money-losing prices in both France and the US.

"If you're making money with other products and you're interested in breaking into a market, why not?" he remarks.

Amazon's vice-president for Europe, Greg Greeley, said his company will try to offer low prices whenever possible and within the bounds of the law.

"Indirectly, Amazon is going to eliminate the incompetent companies that sell at high prices and do not provide good services," says the president of Adigital. "Wherever Amazon goes, it brings with it all the best providers, and there is talk that it will offer free shipping starting at 40 euros. It's going to set tough commercial rules, and many companies will be unable to withstand it. Either you have a niche market or you're going to have a hard time."

Elena Gómez has such a niche. Besides founding Womenalia, a network for professional women, she directs teleciguena.com. "We sell gift baskets for women who have just given birth. We have over 500 models. In 24 hours we're at the clinics with a very elegant delivery service. I compete in a very specific, glamorous niche, and Amazon can't go there; but if I had an online bookstore, I'd be quaking in my boots right now. Either you're very strong or you're going to be swept away. That's the way it's going to be, first with the bookstores and later with other sectors," she says.

Amazon will also have to break long-standing Spanish habits such as cash on delivery, evidence of

Spaniards' mistrust of mail order and of online sales. "We are the only European case, practically the only case in the world, where you still have cash on delivery, which represents 30 percent of total sales transactions," says the president of Adigital. As Amazon allows neither cash on delivery nor money transfers, "we'll see how the customer behaves," she says.

Everything seems to indicate that the customer will react well. "Amazon does the same thing Apple does. When you register, you include your credit card number just once. Using your card every single time will become a thing of the past," announces Palazzi.

The publisher also predicts that we are about to witness the advent of impulse shopping. "Both Apple and Amazon have sale applications for cellphones and tablets. It is not necessary to be in front of the computer all the time. You just click on your phone and in a second you've downloaded a book, a music CD or a movie."

Amazon is also bringing with it the future, which is being played out against Apple and Google. "Amazon is no longer a book distribution system," stresses Pérez. "They launched the Kindle when people were laughing about the book being dead. It's sold millions of units, and they've created an entertainment platform around the device."

What's at stake now, he adds, is how fast the transition will be and who will be in charge: the folks who make the content or the middleman with his platform. "Apple proved that you could change the music industry; Netflix is doing the same with the world of Hollywood. Amazon is on the same track," he says.

Just like Apple, Google and Microsoft, it's never enough. Amazon will compete in every sector of Spanish commerce. "Local industry has had time enough to adapt to the internet, but it hasn't done so and now it's going to suffer the consequences," Ricardo Pérez says. "Many businesses are going to become obsolete."

Greg Greeley, Amazon's vice-president for Europe.
Greg Greeley, Amazon's vice-president for Europe.CLAUDIO ÁLVAREZ
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