Amazon has allegedly claimed that it plans to “destroy” the Australian retail market, and with its efficient business solution, superb data analysis and emphasis on customer service it looks like the global player might actually do it.
We’ve already seen the impact of international brands on local retailers. While Coles and Woolworths remain giants in the grocery space, the rise of German chain Aldi in recent years has started making a dent. Woolworths’ market share has fallen over the past two years while Aldi has experienced a rise in both market share and consumer base.
Delivery is going to become the battleground for both online and bricks-and-mortar storefronts. Any Aussie retailer who does not have a competitive and ready-to-go delivery solution will be caught in the crossfire.
Last financial year Australians spent an estimated $41.3 billion online, up more than 9 per cent from the previous financial year. So with a giant like Amazon that covers everything from books to fresh food, homewares to entertainment, the real battle for Australian retail is going to be how much of that online spend they can keep in Australia. Currently, one of the biggest factors working against Australian businesses is time. Amazon will not afford businesses the luxury of developing, testing and deploying a suitable delivery solution. Instead, they will be acquiring their market share. Once acquired, getting that back from Amazon is a much higher hurdle to overcome.
For stores such as Coles and Woolworths, which are already offering delivery with suboptimal results, the next few years are going to be particularly challenging.
So what can businesses actually do to stop Amazon from destroying both the industry and local livelihoods?
Firstly, it’s not going to be just about innovation.
The US is a particularly competitive market and one whose lessons Amazon is going to attempt to transfer here. Putting aside pricing and product offerings, the real problem for Aussie retailers will be finding a solution for the delivery space that can evolve as the needs of consumers change.
The solution must also be both commercially sound and sustainable for the long term. All the innovation in the world won’t help if you can’t deploy it, scale it, and sustain it to create operational stability.
Equally important is the need for local businesses to embed flawless customer service and user experience in their offerings. Amazon does this with an unmatched passion and capability; I myself have been an enthusiastic Amazon user since 2004. Since Amazon has decided that this market warrants proper attention, its impact on Australia will be both profound and transformative. Businesses need to stop taking the status quo for granted and instead embrace the developing demands that are modern retail.
The simple “two pizza rule” that Amazon CEO and founder Jeff Bezos mandated is a great example. If you’re not able to feed a meeting room with just two pizzas, you’re not going to be fast and nimble enough to take on Amazon.
The good news is that there are ways to compete against Amazon and even beat it at its own game.
Already in China and India, countries Amazon has been targeting online, e-commerce websites Taobao and Flipkart outrank Amazon in local markets. Australian retailers should take advantage of these examples by focusing on their knowledge of the local market while offering a globally sustainable solution to online shopping and delivery.
These types of opportunities will be available but they will not be successful unless you’re willing to adopt a profound and timely change at the speed the market demands, with passion and single-minded determination to actually make it work.
For those traditional retailers who are already behind the times, it may already be too late.