Allegro vs Amazon. Clash in the Valley of the Falcons

The long-awaited news was made public last week – Amazon officially announced its entry into Poland as a sales platform.

Amazon has been preparing for this move for years by building its infrastructure in Poland, but from the perspective of the overall business, this is not a strategic decision for the giant.

On the other hand, for Polish Allegro, this is a very serious threat, which it has been preparing for over the years.

Without demonising the power of Amazon and not downplaying Allegro's position in Poland, a natural analogy is the prelude to the biblical battle of David and Goliath in the Valley of Soko. Is Amazon too sure of its position? Can Allegro win this clash by relying on business acumen and market knowledge? And what will the battlefield look like after it's over? History tends to repeat itself, but will that be the case here? Is effective selling on Amazon possible?

First, the battlefield – the market!
The Polish e-commerce market is a tempting morsel for Amazon. With a population of ~38 million, a value of e-commerce around 22 billion EUR, and double-digit year-on-year growth, it is a promising market prospect. From a European perspective, Polish e-commerce is "only" 26% of the German market or just under 10% of the British market. One could argue about the "maturity" of the West – but the growth rate does not have a fixed "meter"; new tactics are set by changing social habits and accelerators (e.g., COVID-19). E-business does not yet have rigid schemes and patterns.

For Allegro, Poland is the most important (in fact, the only) market. Unsuccessful attempts to enter Germany or the Czech Republic ended in failure. In Poland, Allegro maintains its leading position – about 65% of Polish e-commerce in 2020 (Gemius) – which gives it a great starting position for the upcoming duel. However, Amazon previously established its base in Poland and does not treat our market as a goal in itself, but rather as another outpost for expanding its multi-level empire.

Secondly – an overview of Amazon's strategy.
When Francois Nuyts became the CEO of Allegro in August 2018 (having previously led Amazon in Italy and Spain), it became clear that Allegro would prepare for Amazon's entry into Poland.

This decision led to many changes:

• Allegro Smart

• Tightening of sales (communication between buyer and seller through in-mail)

• Expanding delivery and pickup options

• Work on search quality

• Increased employment from 1.5 thousand (2018) to 2.4 thousand (2020), including in AI/ML departments

• Higher requirements for sellers (higher service quality)

The development of Allegro strengthened its position, reach, and tools – but without spectacular innovations; rather mirroring market solutions. Allegro Smart is a stripped-down version of Amazon Prime/Ebay Plus. The same-day program is just starting; Allegro does not heavily invest in its own logistics/last mile or its own pickup points. The partnership with InPost has brought benefits to customers and sellers (as well as InPost), but least of all to Allegro itself – today, InPost is becoming a natural partner for Amazon as well (a contract has already been signed). Thus, Allegro has ceded ground in logistics – one of the key drivers of modern e-commerce.

Amazon significantly outpaces Allegro in logistics: the FC network in Europe (including many in Poland), the FBA program with cross-border, outsourcing of invoicing for single orders, and VAT support – these are solutions that Allegro, primarily operating locally, did not need.

For Amazon, Poland is an important hub:
– an efficient link in the supply chain for DACH countries,
– a foothold for expansion into Lithuania, Latvia, the Czech Republic, Slovakia, and possibly Hungary and Ukraine.

Although the Amazon interface is sometimes perceived as unclear/outdated UX-wise, the value for the buyer, safety, breadth of offer, pricing policy, and logistics give it an advantage not only over Allegro but also most e-commerce sites.

Thirdly – a review of the armament.
Allegro: spontaneous brand recognition 86% (2020), ~20 million monthly visits, stable position. In its ecosystem, it also has Ceneo.pl, which aggregates traffic and data.

Amazon: a business behemoth.
Allegro's assets (Q3 2020) are ~1.4% of Amazon's assets; the market cap difference is about 98.7%.
A wide network of Amazon FC, its own distribution sales, 100+ private labels, Amazon Video, 500k+ employees, its own logistics (line-haul and last mile) and AWS that finances and supports the rest of the empire – this is an impressive arsenal.

Fourthly – morale!
In the Polish market, Allegro has a starting advantage: high brand recognition, loyal customers, wide reach, fresh stock market success (WIG20). Allegro was a pioneer of e-commerce in Poland and has grown alongside the market, adapting to users and creating opportunities for sellers. Its modest international expansion can be criticized, but one cannot deny its position as a leader in the country.

Amazon, on the other hand, is less recognized among average Polish users (often associated mainly with FBA warehouses in Poland). Breaking into customer awareness could take months or years. The advantages that could quickly resonate with Poles and dethrone Allegro's advantages are breadth of offer and prices – Amazon.pl will pull in offers not only from Poland but from all over Europe and beyond. A niche English book? Accessories for a new smartphone on launch day? That’s standard. Moreover, often lower prices due to organization by EAN, price monitoring and its own sales (Vendor Central).

The clash between Amazon and Allegro
Comparisons to David and Goliath may sound exaggerated, but they capture the atmosphere surrounding Amazon.pl and Allegro. Both platforms are calling for a duel and working on their PR.

Amazon has global experience, enormous financial and human resources, top-notch logistics (partly already in Poland), a coherent "customer obsession," and spectacular R&D. Allegro has its leading position, a loyal customer base, and wide reach. Will that be enough to "knock out" Amazon with "one blow"? Probably not.

This will not be a spectacular showdown of titans, but a long, arduous battle for the market, categories, segments, and shares – until one side either is "bled dry" or cedes ground. One thing is certain: we are in for a very interesting time.