With Amazon’s launch into the Australian market around the corner, the picture of what that means for Australian consumers and retailers is becoming clearer.
For Australian consumers, Amazon is likely to wind-up offering everything from fresh and non perishable groceries, beauty products, wine, clothing and fashion, furniture, musical instruments, pet supplies, consumer and home electronics and appliances to power and hand tools.
Initially Amazon will be an online offer with much faster deliver times due to centralized distribution warehouses around the country. But plans are afoot for bricks and mortar retail stores is regional centers. And here’s the real kicker – Amazon intends to price-point their offer a huge 30% below current retail prices.
Amazon already does $1 billion in sales annually in Australia by shipping from overseas, according to analysis by Morgan Stanley. That is one-hell-of base to build a local retail operation on. Looking to the US, for every $1 spent online, Amazon accounts for 50c of those sales and its market share continues to grow.
The real blue sky for Amazon in Australia is not capturing more of the online spend, but driving bricks and mortar shoppers online with better priced offers and convenient delivery. In the last two years we’ve seen UberEats (and to a lesser extent Deliveroo and Foodora) change the eating-out habits of people, increasing average spend by 20%-30%. Consumers are more open to behavior change than ever before, and businesses stuck in their ways (think taxi drivers) need to get unstuck before they’re blown-away.
Reportedly an Amazon Executive behind the Australian roll-out has indicated their strategy is “to destroy the retail environment in Australia”. Amazon sees enormous opportunity in the Australian market because it believes prices here are too high.
And the Amazon threat does not end there. In the US Amazon also offers annual membership to Amazon Prime, which includes 2-day shipping on items (also access to Prime Now – offering free delivery within two hours in certain locations), unlimited access to Amazon Prime Video, similar to Netflix, with a library of movies and television shows; unlimited access to Prime Music, a music streaming service; the ability to borrow books from a Kindle lending library; and a restaurant meal delivery service in major US cities. Around 60 million people have so-far stumped up the $99 annual subscription fee for Amazon Prime.
So what does this mean for Australian retailers?
The answer to this questions really depends on which camp they find themselves in. Many local retailers (including some of our most established) have failed to invest in branding, following a low cost model instead. Clive Peeters, Harvey Norman, JB HiFi, Officeworks, Target, Woolworths & Coles to name a few will find themselves undifferentiated in brand and undercut in price – a very tough spot to be.
Compare the plight of these brands to those I categorize as ‘next generation’ retailers who have built differentiation and unique value at the heart of their retail brands. The likes of kikki.K, Mecca Cosmetics, Blue Illusion and The Vital Ingredient have invested in building multi-layered value-based brands and tribes of engaged, loyal customers who are not price-driven, and around whom the product range has evolved.
This second group of retailers have positioned themselves to withstand the arrival of Amazon in Australia by investing and mastering brand and customer engagement. The first group – not so much.
David is the founder of Truly Deeply, a brand agency with 25 years experience working with brands to position them for growth. His deep expertise is in the creation of high engagement brands that attract the attention of their audience and stand out from their competitors. David has extensive experience working with corporate, retail, food & beverage and entrepreneurial clients. Find out more here
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Pics courtesy Amazon.
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