Amazon’s ruthless business model meets Sweden’s labor unions

It’s Sweden’s storied worker protections and climate-conscious citizens welcoming Amazon’s ruthless drive for low prices. What could go wrong?

Stockholm is preparing for a tug-of-war with one of the world’s most powerful companies — which just announced its entry into the Swedish market — and hopes that its arrival will mean the country of 10 million will be able to change Amazon, instead of being changed by it.

Amazon’s plans — dubbed “Project Dancing Queen,” after the hit song by Swedish pop group Abba — don’t have a lot of detail, but analysts believe its Swedish store will go live in the fall, in time for November’s Black Friday online shopping bonanza.

“Amazon has been supporting Swedish customers and selling partners across our different European stores for many years, but the next step is to bring a full retail offering to Sweden and we are making those plans now,” said Alex Ootes, Amazon’s vice president for EU expansion, in a statement.

Amazon’s turbo-capitalism corporate culture goes against the grain of Sweden and the rest of the Nordic countries, which pride themselves in their strong labor unions and sustainability.

“Swedish e-commerce is still like regular retail without shopping malls” — Jonas Arnberg, CEO of market-research firm HUI

But the country also has an affluent, internet-savvy market ripe for Alexa, Kindles, Prime and the thousands of items on Amazon’s online store, the company believes. Around 68 percent of Swedes shopped online in 2018, and they spent an average of €200 per online transaction. In total, the Nordic countries spent over €22 billion online in 2018, according to a study by PostNord, the country’s postal service.

There’s not a lot of competition in online marketplaces, and nobody can match Amazon’s massive cornucopia of goods.

“Swedish e-commerce is still like regular retail without shopping malls,” said Jonas Arnberg, the CEO of HUI, a market research company.

Amazon will change that, and force local players to adopt e-commerce faster than they would have otherwise.

“It’s a perfect storm in e-commerce now. The COVID-19 impact took us two to three years forward in digitalization. With Amazon’s entry it is going to go even further,” said Kristoffer Väliharju, the CEO of CDON, a Nordic online marketplace. Väliharju is optimistic about CDON’s chances of taking on the tech giant, but said companies without a strong e-commerce game will likely take a big hit.

Initially, Swedish and Nordic clients will be mainly served from German warehouses — known as fulfillment centers in Amazon-speak — with trucks driving up to Sweden through Denmark, and a fulfillment center operated by local partner Kuehne + Nagel in the Swedish town of Eskilstuna, near Stockholm.

Analysts believe local warehouses are inevitable if Amazon is to offer one of its most unique selling points: quick delivery.

When in Stockholm

Establishing a local operation will be a major challenge for the company. American Amazon’s anti-union stance and working culture is the antithesis of pro-union Sweden. (Swedish Prime Minister Stefan Löfven’s political career is rooted in union activism dating from his time as a welder.)

The Swedish labor market is regulated by collective agreements between companies and unions, giving workers plenty of power over corporate decisions. Approximately 70 percent of Swedish workers belong to a union.

“If Amazon wants to succeed in Sweden, they need to work very closely with unions,” said Arne Andersson, an e-commerce expert at PostNord.

Amazon has not yet contacted Handels, the union representing warehouse workers, its political coordinator Emelie Wärn told POLITICO.

“Amazon is welcome to Sweden, but they have to sign a collective agreement. We will work very hard to get them to do that,” Wärn said.

“The fact that international companies takes interest in the Swedish market place is a positive thing. As an employer in Sweden you are obliged to follow Swedish labor legislation, which includes regulations regarding collective bargaining,” said Eva Nordmark, Sweden’s minister of employment, adding that approximately 90 percent of the employees in Sweden are covered by collective bargaining agreements.

The minimum wage for a card-carrying Swedish warehouse worker is 142.50 Swedish krona (€13.85) per hour before tax, according to Handels. In contrast, Amazon’s Polish warehouse workers who serve the German market earn 20 zlotys (around €4.50). Amazon said its workers in Germany earn a base pay of €11.10 an hour.

But the union is confident it will be able to negotiate with the tech goliath. Handels has done similar deals with Japanese fashion chain Uniqlo, Wärn said as an example.

But Uniqlo is not Amazon, and Handels’ confidence might be misplaced, according to Markus Varsikko, a retail consultant at Dash Retail, which helps businesses use Amazon’s marketplace.

“Amazon is a realist. If they can operate in Germany, they can operate in Sweden. It is an American company with American culture and thinking, and it is far from what we are used to here,” Varsikko said, arguing that Sweden’s companies and workers might have to adapt — not the tech giant.

Handels and Greta

Amazon might also have to polish its sustainability credentials to appease Swedish consumers.

“What makes the Swedish market unique is that there is a great focus on companies to do good, be transparent and sustainable. For many Swedes, this is even more important than a wide range and low price,” said Niclas Eriksson, the CEO of electronics retailer Elgiganten. And thanks to local activist Greta Thunberg, consumers are becoming increasingly aware of the carbon footprint of services like next-day delivery.

European consumer groups have slammed Amazon for selling dangerous and illegal products such as toxic toys and exploding power banks on its platform.

Plus Amazon’s insistence on lower prices might not be its winning ticket.

The foray into the Swedish market by another e-commerce company, Wish, may serve as a cautionary tale. The American online marketplace, which mostly sells cheap items from China, tried and failed to take over the market a few years ago. The company first wooed consumers with dirt-cheap products such as electronics and clothes, only for Swedes to be disappointed by the quality of the products and frustrated by not being able to return products to sellers.

“[Wish] was cheap, it was a great marketplace, but it was also crap,” said PostNord’s Andersson. Wish did not respond to a request for comment.

Amazon’s had troubles with quality control too. European consumer groups have slammed the company for selling dangerous and illegal products such as toxic toys and exploding power banks on its platform. The European Commission also put pressure on online platforms to control scammers and price gouging during the coronavirus pandemic.

CDON’s Väliharju said Swedish customers are very quality-conscious, and aware of their rights as consumers. Consumer groups and brands have criticized Amazon and others for not holding sufficient information about their sellers, especially for products that come from outside the European Union that could be dangerous or counterfeit.

“Amazon absolutely could be well met by Swedish consumers in the beginning,” said Arnberg, the CEO of HUI, citing Amazon’s promise of low prices, a big range of products and fast delivery.

“But in the long run they will have to adjust to Sweden.”

This article has been updated to include Amazon’s partnership with a warehouse provider in Sweden, and Amazon workers’ wages in Germany.

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