How will Amazon affect Australian retailers?

How will Amazon affect Australian retailers?

The big news in the realm of Australian retail is the forthcoming arrival of Amazon. The American retailer, which is valued at around $US427 billion, is setting up shop on Australian shores, and while there is no formal launch date, signs point to early 2018 if not sooner.

So should Australian retailers be worried? Amazon, after all, exemplifies the disruptive business model. When the company began in the US 22 years ago, it was seen as a minor threat to bookstore owners. Today, it dominates the book market and has become the second largest retailer of consumer electronics. Bricks-and-mortar stores have posted consecutive losses, unable to keep up with a business model that cuts its overheads back to the bone.

All the evidence suggests that Australians, too, are likely to take advantage of Amazon products when theyre able to. A recent Neilsen survey found that 75% of Australians surveyed were excited about the launch, with 45% planning to subscribe to Amazon Prime for faster delivery and special deals.

Big businesses

That means big retailers such as Harvey Norman, JB HiFi and even Myer must look to their laurels. Citigroup estimates that sales of electronics and various entertainment media could cause as much as a 20% drop in profits once Amazon has found its feet.

But the news isnt all bad. Unlike American retailers, which were caught unawares, Australia has been able to watch and learn. That gives those big retailers a chance to make their processes agile now, rather than waiting. If retailers can offer online value, a personalised customer experience and convenience, theyll be able to withstand the Amazon onslaught.

Small businesses

As for smaller retailers, the forecast is mixed. One of the major threats here is complacency. Historically, Amazons presence has been limited to a limited number of media offerings, including ebooks and kindles. That might have had the effect of lulling retailers who arent in the entertainment business into thinking that they wont be affected. In fact, Amazon is likely to target everyone from clothing stores to wine companies: if youre selling a product that can be posted, youre vulnerable.

Small businesses can set themselves apart from the crowd by focusing on niche products that Amazon is unlikely to stock. Personal service is another aspect that cant be matched by the giant. Retailers from clothing to consumer electronics can offer a point of difference by making customer service the front and centre of their operation, thus encouraging people to come in and browse instead of letting their mouse do the walking.

Staying visible in the local community is another way to foster those bonds, and means that when someone is out for the perfect gift, they may just trust a local shopkeeper over a website. In fact, some analysts say that small retailers are better able to compete with Amazon, which is entirely remote, than the big bricks-and-mortar stores. Marketing Focuss Barry Urquhart told The Guardian, Small businesses can easily live with and beat Amazon simply by providing personal interactive experiences loyalty to the individual rather than the product.

Moreover, Amazon can assist small businesses in extending their own reach. By partnering with the behemoth, small companies offering unique products can deliver to a huge global base. Amazon offers logistical capability on a scale that small businesses simply cannot achieve, making this a potential win-win situation.

Whether youre a small or a larger business, its clear that Amazon is a force not to be ignored. Many experts are predicting that Amazon will experience a similar roll out here to the way it impacted the Canadian market. That means it wont happen all at once, but rather the ramifications will be felt over the next three years. Businesses would be well advised to use their time now to research what Amazon does and where its market advantages can be challenged, rather than sitting back and waiting for the effects to show themselves down the track.

This article was written by Tanya Ashworth-Keppel on behalf of the Australian Institute of Business. All opinions are that of the writer and do not necessarily reflect the opinion of AIB. The following sources were used to compile this article: Forbes, Business Insider, Australian Financial Review, Nielsen and The Guardian.

Image credit: ABC

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