Amazon! That’s what everybody in Australia is talking about right now. Many are predicting the arrival of the retail evolution in Australia, to some extent they’re right. They’re launch could fast track the change in consumer behaviour that we are already witnessing as a nation. In fact, we have already seen the havoc it has caused through the free media attention it is getting from media organisations looking to predict its launch. They not only predicted wrong, but gave them a platform that they didn’t even have to spend any capital to gain.
Australian mainstream media has gobbled it up and portrayed a picture of panic, while many retailers and businesses have underestimated its impact. A survey of 600 retailers, conducted earlier in the year by the Commonwealth Bank, found that only 41% of retailers saw Amazon as a threat to their business. If this was of small businesses, I may agree. However, retailers are more susceptible due to the similarity in structure and operations. The behemoth that Amazon is, has more capital, is able to undercut retailers on price and overall reputation to draw many consumers away from competing retailers.
For those that take solace in the Canadian example of Amazon’s release, you might want to think again. Canada is next door to Amazon’s headquarters in the US. Therefore, it would have reached the nation while the company was still quite young, beginning in 2000. The Amazon of today is a much more advanced, globally recognised and retail pioneering company that has spread its wings far beyond its neighbour state. Hence its experiences around the world have taught it much about how to launch in different markets.
The biggest indicator of a different style of launch in Australia, comes from the company itself. The Australian manager of Amazon has highlighted that the Australian expansion will be more like that of Spain, rather than Canada. In Spain, within a few months of launching Amazon had introduced both the marketplace and its Prime service. The Prime service gives members that subscribe, free shipping on their items as well as other benefits. In reality, this is where Amazon begins to really penetrate the local market as people have the convenience of getting almost everything they need within the comfort of their own homes and also have it delivered free.
The e-commerce giant, will also help increase consumer confidence in online shopping with its reputable brand. With that, it’s also going to force the hand of other retailers to invest in e-commerce, which takes time that they really don’t have at the moment. The shift is also going to have two major impacts on bricks and mortar; with more people shopping online, landlords will be forced to reduce rent as demand decreases and more focus is placed on the e-commerce component. The other impact will be with regards to pricing. Retailers will be made to become more competitive on pricing as Amazon is notorious for the pricing wars it wagers, causing deflation of consumer goods.
Nonetheless, Amazon’s impact may be more profound on larger retailers rather than small businesses. As we explored before, larger retailers are built similarly to online-shopping giant. Due to its sheer size and ability to reduce prices, retailers will struggle to hold them off for very long. Small businesses on the other hand, have the advantage of being able to create a unique buyer experience that is more memorable than that of the amazon cog-wheel. Therefore customers may be more likely to stay loyal to these kinds of businesses for the personal shopping experience they deliver.
In terms of how Australian businesses can fight back, we look to Cota Capital founder Bobby Yazdani. An early-stage investor in Google, Dropbox, Salesforce and Uber, Mr Yazdani speaks about companies having to adapt or risk becoming extinct. His advice is to, ‘disrupt your business, before somebody else disrupts it’. He advises that businesses take a leaf out of Amazon’s book and develop data factories that give them insight into customer behaviour, in order to create holistic shopping experiences that leave them wanting to come back for more.
With this in mind, I say ‘let the games begin!’