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Amazon ( AMZN ) faced strikes by workers at its warehouses in Germany last month over long-running issues of pay and working conditions. The German labor union Verdi highlighted lower pay of Amazon's warehouse workers and demanded these workers get pay equivalent to their peers in the retail industry. However, Amazon refused to oblige, stating that these workers were paid on par with their peers in the logistics industry, which should be the appropriate comparison in this case.

Although the strikes are unlikely to have significantly impacted Amazon's sales last year, the company should focus on improving and growing its business in the country considering Germany's share of the retailer's global sales has consistently gone down over the last three years. Germany is the second largest market for Amazon after the U.S., contributing about $12 billion in sales each year, including e-commerce and Amazon Web Services.

Amazon E-Commerce Sales In Germany

Amazon currently dominates the German e-commerce market by a wide margin. It has a share of about 13% in the $66 billion market, followed by German retailer Otto with 3.8% and Zalando with 1.7%. Amazon's sales grew at an impressive 19% in Euro terms year-over-year (y-o-y) in 2015 but a weak Euro (against the U.S. dollar) erased most of those gains. In U.S. dollar terms, Amazon's e-commerce sales grew 4.5% y-o-y in Germany in 2015, which was still better than the stagnant e-commerce market in the country (in U.S. dollar terms). amzn-35

Germany is the fifth largest e-commerce market in the world, with about $66 billion in online sales, after China ($563 billion), the U.S. ($349 billion), the U.K. ($94 billion) and Japan ($80 billion). The German e-commerce market is interesting, because 58% of the country's population shopped online last year, and e-commerce sales are increasing at over 12% annually (in Euro terms), despite a near stagnant population and a low single-digit GDP growth rate.

Another factor that should encourage Amazon to increase its focus on Germany is the e-commerce market potential. Online retail sales marked just 6.6% of total retail sales in the country last year, comparable to Japan's 6.7% but below the United States' 8.4%.

AWS In Germany

Germany is ranked as the sixth-largest market for cloud computing and cloud services in the world. Research and Markets estimates the cloud services market to rise to $20 billion in Germany by 2017. Germany was the third ranked cloud market in the Cloud Readiness Index compiled by the Asia Cloud Computing Association (ACCA) in 2016. The country was tied with the U.K. and better than the cloud readiness of the U.S. in the rankings. (( Cloud Computing Top Markets Report , Trade.gov))

While Germany offers great potential, there are limitations to market access, especially among German SMEs. German SMEs usually prefer domestic providers compared to U.S. providers for their cloud computing needs because of cross border data transfer and security concerns. In order to comply with Germany's strict data sovereignty laws, Amazon opened a data center unit in Frankfurt in 2014.

AWS is also certified under the EU - U.S. Privacy Shield Framework which introduces stronger obligations on the handling of data from the EU and provides greater protections for individuals. This could be advantageous for Amazon in the short to medium term, as gaining trust in the domestic market is key in the cloud infrastructure business and Amazon has a prime mover advantage compared to other major competitors in Germany. For perspective, Microsoft ( MSFT ) and Alibaba ( BABA ) opened their first data centers in the country in September and November last year, respectively. (( AsiaCloudComputing.org , 2016))

At the moment, AWS has three regional centers in Europe - Dublin, Frankfurt and London - and a new one is coming in Paris.

Have more questions about Amazon? Please refer to our complete analysis for Amazon

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