Poland’s E-commerce War: Amazon vs. Allegro

After announcing in January 2021 that sellers can register for its new Polish website that will go live soon, Amazon launched its Polish website at the beginning of March 2021. The e-commerce giant entered a fast-growing Polish e-commerce market using its proven strategy and global reach.

The Eastern European e-commerce markets are in an emerging stage and are much smaller than their top Western European counterparts, i.e. the UK and Germany. However, a rapid growth recorded in recent years and opportunity for expansion makes them an attractive target. For example, Poland’s 42% market growth rate is the fastest in Europe.

The Covid-19 pandemic provided an unprecedented boost for the Polish e-commerce market. It has seen an improvement of terms for shoppers and third-party sellers alike, as more consumers and businesses shifted online.

Amazon currently has a tiny presence in emerging Eastern European e-commerce markets, including Poland and the Czech Republic. Until now, it has run logistics centres in the region and served customers from its German website.

Global giant seeks to challenge domestic leader Allegro

Amazon generates 4.5 billion monthly visits globally, making it the most popular e-commerce platform in the world. It currently holds approximately 1.3% of the Polish e-commerce market.

Allegro is Amazon’s largest competitor in Poland, holding 33% of the e-commerce market share, thanks to its strong consumer base and fast deliveries. The company, founded 20 years ago, debuted on the Warsaw Stock Exchange in October 2020, with one of Europe’s biggest initial public offerings of the year, and immediately became Poland’s largest listed firm. Allegro now ranks 13th amongst the most popular e-commerce platforms in the world, with 220 million monthly visits. The company has ridden a boom in online sales amid repeated shop closures during the coronavirus pandemic.

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China’s Ali Express is the second largest e-commerce player in Poland, holding a share of 3.6%. It gets 467 million visits per month.

Amazon’s entry exposes Allegro and other local players to significant competition risk, challenging the possibilities of further market share and higher margins. Amazon fees may be higher, but it grants merchants access to global fulfilment and packaging services as well as international shoppers.

Beating local market knowledge will require significant investment

In its expansion, Amazon has been so far prioritized bigger, Western European markets, where it has already secured success against firmly established local e-commerce players. This strategy has given its competitors in Poland the time to build deep foundations and prepare for its arrival.

Allegro has developed a strong local brand. While the company has mainly competed with itself so far, it has still introduced improvements to its services in order to strengthen its position. In preparation for Amazon entry, Allegro has recently rolled out loyalty programs, free delivery, same-day delivery and a deferred-payment option for buyers, amongst other perks. The company has also outlined its plans to increase investments in areas such as research and development. It plans to hire 1,200 workers for a new logistics centre near Warsaw.

Time will tell if the global e-commerce giant will be able to persuade shoppers in Poland to switch to its platform. Allegro’s local market knowledge can grant a competitive edge, especially if Amazon repeats the missteps it made entering Sweden, in October 2020. The translation errors and glitches, including mistaking the Argentinean flag for the Scandinavian, spoiled the company’s Swedish debut.

Challenging Allegro will require significant investment from Amazon, as Allegro looks in a position to defend its share for at least some period of time.