The road just off the M4 on the way to Swansea has a golf course on the left and a series of business parks, some of them with vacant offices, on the right. While most of the buildings are instantly forgettable, one huge facility is most certainly not, and it bears a logo that strikes fear into retailers from Tesco to Argos.
The online retail giant Amazon’s huge distribution centre is painted a light grey, with yellow borders around its windows, but it will be red hot on Monday with activity. This is because 3 December has been dubbed Cyber Monday, when countless Britons take to their laptops, computers and, increasingly, smartphones to buy Christmas presents.
Speaking to The Independent at the 800,000 sq ft facility, Allan Lyall, vice-president of Amazon’s European operations, expects Monday to be its busiest day this year, pointing to Amazon’s UK website receiving orders for more than 3 million items – a rate of 35 items a second – on the corresponding day last year.
Certainly, UK consumers in their millions have embraced Amazon since it launched here in 1998. While they originally flocked to its site to buy books and CDs, it is now a magnet for shoppers looking for everything from lawnmowers, cat food and dresses to 60-inch TVs.
But as Amazon, founded by chief executive Jeff Bezos in 1994, has grown remorselessly, it has come under greater scrutiny over its crushing impact on the high street and the minuscule amount of tax it pays. MPs branded Amazon “immoral” for diverting profits to Luxembourg for tax purposes, as it was revealed that it paid £2.3m in corporation tax on UK sales of £7bn between 2009 and 2011.
Mr Lyall declines to comment on tax, but waxes lyrical about how Amazon is gearing up for Christmas at the Swansea depot, which resembles an enormous Santa’s grotto.
It has hired 1,000 temporary staff at Swansea ahead of the Christmas period, in addition to the hundreds already working there.
But the distribution centre, one of eight in the UK, is not what most would expect from an online behemoth which expects to deliver global sales of up to $22.8bn (£14.2bn) in its fourth quarter. While it is a hive of activity with forklift trucks, conveyor belts, computers and hand-held device-laden staff, the first impression is of a huge hodge-podge of brown boxes and shelves, with products sorted as “smaller, bigger and great big products”.
For example, luxury bath soaps, electric razors, books and muscle protein tablets are stored together, providing the ultimate looking glass into the lives of British consumers.
Staff scan products – which are all given a six-point quality check for defects – and store them on the system within 12 hours of items arriving. Mr Lyall says: “Once something is scanned the website knows it is available for sale. We have millions of items in the building and the software knows exactly where they are.”
Once pickers have completed orders on their hand-held devices from endless rows of shelves, they are whizzed down conveyor belts to be put in the famous Amazon brown boxes by “packing associates”. Orders are finally dispatched to the huge fleet of waiting delivery vehicles.
While all this efficiency will reassure consumers, Amazon continues to cause anxiety to most of the high street, including the likes of Tesco. Its grocery offer shows how far its tentacles have wrapped around the high street. It was launched in July 2010 to sell 22,000 items, from nappies to biscuits. But this has now been expanded sevenfold to more than 150,000 products, although Mr Lyall says it has “no plans” to offer fresh food. That said, the company launched such a service, AmazonFresh, in one city in America’s Washington State in 2007 and later expanded it to neighbouring Seattle.
Amazon’s share of the UK’s £5.6bn online grocery market remains tiny for now but the company dominates the market for books and entertainment products. Its share of the physical book market has more than doubled to just shy of 33 per cent over the past four years.
Its growth in e-books has been even more meteoric since it started selling its dominant e-reader, Kindle, in August 2010. Mr Lyall says: “We are now selling more e-books than physical books,” a milestone it passed in the UK in August. Industry bible The Bookseller estimates that Amazon UK has a 90 per cent share of the e-book market. Amazon’s latest Kindle Paperwhite e-reader and Kindle Fire tablet will be among its best-sellers this Christmas.
Mr Lyall denies that Amazon is contributing to nearly one in seven shops being empty on the high street and says: “Online and the high street can co-exist. Since online developed prices have dropped because it gives consumers the choice to go online or to physical stores.”
But Amazon’s grip on the market for DVDs, CDs and computer games has become equally vice-like, with its 20.3 per cent share leaving HMV trailing in its wake with 16.1 per cent. Indeed, Amazon has featured heavily in analysis of High Street administrations, such as those of Borders UK, Zavvi, Game Group and Comet, over recent years.
Whatever shape the retail sector takes over coming years, it appears certain Amazon – which plans to hire 2,000 more staff with three new distribution facilities by 2014 – will continue to grow.
Neil Saunders, managing director of retail consultancy Conlumino, says: “Amazon has had an enormous impact. It has taken sales away from the high street and heightened price competition. Retailers have had to sit up and take notice and sharpen their pricing pencils.”
Amazon by numbers
Amazon’s largest fulfilment centre, in Dunfermline, is the size of 14 football pitches
More than 10,000 seasonal workers are being hired by Amazon this Christmas
Over 3 million orders were received by Amazon.co.uk on Cyber Monday last year
More than 2.1 million items were shipped in one day during Amazon’s peak last Christmas