Long gone are the days of Amazon exclusively selling books, the US site now ships everything from clothes and electronics to fresh produce, and their arrival is sure to send shockwaves through Australian retailers.
Here’s a quick rundown for those who might be unfamiliar with Amazon. Like Facebook and Google, Amazon are hoarders of customer data and they use this data to tailor offers and advertisements to customers based on their shopping and search histories. Amazon keep their prices so low because they don’t try to maximise their profit margin, instead, they use price comparison software and reinvest into keeping their prices low and extending their distribution networks
For a $US99 a year subscription fee, customers get access to ‘Amazon Prime’. This is basically Amazon’s premium service which includes free video streaming, free deliveries and faster deliveries. ‘Amazon Prime’ is where they make a lot of their money – having paid the annual fee, customers feel compelled to make use of it by making more purchases. ‘Amazon Prime Video’ is a direct competitor to Netflix and even includes some of Amazon’s own produced television series.
What may interest Australian retailers the most, however, particularly smaller retailers, is the ‘Amazon Marketplace’. As well as its own products, Amazon also has their ‘marketplace’ feature, which enables third-party retailers to sell their wares on-site.
So how is Amazon’s (probably imminent) arrival going to affect the Australian retail industry? Well if you’re a consumer, it’s going to be awesome. For retailers, it’s not so awesome. Amazon’s move to Australian shores is going to a bit of a double-edged sword for local retailers, with companies like JB Hi-Fi and Harvey Norman engaging in huge fights over cheap electronics. Fashion retailers will also be hit hard with Amazon becoming another huge player in the ‘fast fashion’ war. The sheer amount of resources Amazon is able to throw behind its Australian expansion is enough to make any retailer anxious.
There are some potential benefits, though. Amazon’s move to Australia could also spearhead an increase in online retail activity by consumers. Australia has a relatively low e-commerce penetration rate when compared to more mature markets like the US and UK, however as many Australian consumers are already aware of Amazon (many of whom already shop from overseas online retailers); their move into our market may increase online shopping activity across the board. Amazon will also become a new platform for Australian manufacturers to get their products out to Australian and global markets. The Amazon Marketplace could prove to be quite lucrative for Australian retailers, particularly smaller businesses, but only if they are able to offer a unique, niche product that Amazon won’t be able to offer on its own.
Regardless of how you look at it, Amazon’s arrival in Australia is going to have a huge (mostly negative) impact. But this long lead up will allow business to prepare themselves for the inevitable change. Businesses need to understand that while Amazon may let you use their platform to sell your product, they will often be selling the same product in competition with you. Retailers are going to have to adapt and innovate if they want to stay afloat when the Amazon tidal wave hits.