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Amazon is helping Spain small businesses

I have found on Bloomberg a very interesting article (enclosed below) about how Amazon is helping small business in Spain. It is really amazing how global and small our world has become. A Japanese bought from Spain seller a soccer ball in Barcelona colors using Amazon infrastructure. Just 20-25 years ago it sounded as a complete sci-fi. 

Amazon Helps Mom-and-Pop Store in Barcelona Reach Global Village

As a child in the 1980s, Ramon Fabregas helped with the flood of Christmas shoppers at the family toy store set up by his great grandfather. Now that he runs the shop, he barely sees any clients. 

When local demand for his goods dried up in the depths of Spain’s economic crisis in 2011, Fabregas discovered he could reach a global market selling his products on Joguines i Bicicletes Gaspar, based in a town 30 kilometers (19 miles) north of Barcelona, now makes 95 percent of its sales over the Internet to places as far-off as the U.S. and Japan. 

“If it weren’t for online sales I would have had to close the shop -- without a doubt,” Fabregas, who runs the business with his wife, said in a telephone interview. “The physical store by itself wouldn’t be possible.” 

Web-based platforms like Inc. (AMZN), EBay Inc. (EBAY) and Rakuten, Inc. (4755) have offered Spanish retailers a way to escape a domestic market hollowed out by five-year slump as they seek to re-wire their operations for the 21st century. Spain is the fastest-growing market for the Amazon logistics service which handles deliveries for retailers, according to Javier Alvira, head of the country’s third-party operations in Spain. 

For Fabregas, 37, the tipping point came after he set up a website to market his range of dinosaurs, pirate ships and paddling pools, to save on printing costs for his traditional paper catalog. The shop was struggling to stay in business when he took over in 2009 after his father retired. Then Amazon representatives saw the website and invited him to join the third-party vending platform the Seattle-based online retailer was opening in Spain. 

Export Growth 

“I didn’t even know about Amazon,” he said. 

Exports are the cornerstone of the Spanish government’s strategy for paying down foreign debts and repairing an economy that shrank by 7.4 percent between 2008 and 2013 as unemployment rose to 26 percent. 

Foreign sales increased to a record 98.7 million euros ($132 billion) in the first five months of the year and the economy completed its first 12-month stretch of growth since 2008 in the second quarter. 

For many small businesses that lack the scale to reach international buyers on their own, third-party Internet platforms like Amazon’s Marketplace have offered a lifeline during the crisis. The company started the service in 2011, the same year it opened its Spanish domain, just as the local economy entered a double-dip recession. 

Catching Up 

The company offers two separate services. Marketplace allows retailers to list their products on where they are picked up alongside Amazon’s own offerings in client searches. The logistics service goes a step further, handling the delivery as well. Amazon even stores products for some clients in its own warehouses to reduce delivery times. Retailers pay a monthly fee of 39 euros plus a commission starting at 7 percent. 

Spanish third-party sales on Amazon’s websites have risen 300 percent over the past year while the logistics business grew 200 percent, Alvira said. 

“It’s clear that as a country we started later with e-commerce,” he said. But now “activity is catching up with other European countries.” 

Javier Cantos is an example of how exporting over the Internet can offer a route out of unemployment. Cantos, 44, had worked for a small company in Valencia for more than 20 years marketing and selling car appliances. When the firm went bankrupt last year, he decided to set up on his own, selling his products through a website his wife had set up. 

Amazon’s Algorithm 

A year later, the family have three employees and third-party platforms account for about 50 percent of sales which range from Betty Boop-themed car-seat covers to tires and sensors. Half of all sales are shipped outside Spain. 

“My main advantage is knowledge, from 21 years’ experience in the auto industry,” he said in a telephone interview. “I know brands, products, trends -- probably much more than the algorithm Amazon uses to identify best-selling products.” 

Still, Amazon’s third-party business, which started in 2000, has been a source of tension with larger brands that prefer to keep control of their sales channels. While a company can decide whether to sell to Amazon directly, they can’t curtail the flow of resale items because third-party merchants have their own indirect ways of obtaining products. 

About 40 percent of the items sold on Amazon come from the so-called gray market, with thousands of listings appearing from companies such as Estee Lauder Cos. and LVMH Moet Hennessy Louis Vuitton SA, among others, even though the firms don’t collaborate with Amazon. 

Barcelona Soccer 

The Spanish exporters using Amazon are winning business more through their ability to source cheap products from wholesalers than by producing goods which can command a premium. 

“We don’t know how but a lot of times, Spanish retailers manage to find good prices,” Alvira said. 

Fabregas agreed. While he can capitalize on the unique appeal of some local products, such as the global cachet of his hometown soccer club Barcelona CF, he said offering the lowest prices is fundamental to attract customers. 

“I once sold a ball in the Barcelona colors to a client in Japan,” he said. “Postage was probably much more expensive then the ball.”