AMAZON: WHAT’S REALLY GOING TO HAPPEN?

It’s pretty near impossible to pick up the AFR these days without reading a story about the impending arrival of Amazon, filled with various theories of imminent doom for Australian retailers. What is it really going to mean? Should we panic, or is it overblown? 

By Kate Morris, founder adorebeauty.com.au

It’s pretty near impossible to pick up the AFR these days without reading a story about the impending arrival of Amazon, filled with various theories of imminent doom for Australian retailers. What is it really going to mean? Should we panic, or is it overblown? 

More customers shopping online, more often

Australia’s large retailers took a long time to embrace ecommerce, and this has slowed down the pace of online shopping adoption in Australia. According to NAB’s Online Retail Sales Index, online shopping in Australia represents only 7.3% of total retail sales. In comparison, online retail in the UK is at 14.6%, while the USA is at 11.7%. There’s plenty of room for online retail to grow in Australia, and I’d expect that a strong household name like Amazon will speed this growth up.

Higher customer expectations

A large proportion of Amazon’s customers subscribe to the Amazon Prime service, which offers free and fast shipping on all products fulfilled from an Amazon warehouse. Customers are going to get used to the “free” and “fast” bits pretty quickly, and this will lift their expectations for all their online shopping experiences.  If you can’t currently offer same-day dispatch or next-day delivery, you’ll need to shape up before your customers decide they can’t be bothered waiting.

Voice shopping to reduce brand power

Amazon’s Echo device is an in-home speaker featuring a virtual assistant, “Alexa”. Powered by voice commands, Amazon Prime customers can simply ask Alexa to “re-order shampoo”, for example, and like magic the products arrive within a day or two via Amazon.  

However if the customer doesn’t request a particular brand (and how often do you write a brand on your shopping list?), Amazon will most likely send its house-brand product – which perhaps is why Amazon is offering exclusive Alexa-only prices to encourage customers to get used to voice shopping.

Amazon is already here

In 2016, Amazon was already the number two online shopping destination for Australians, just behind eBay. The local operation will enable the faster fulfilment that Amazon is known for in other markets; however Australia has a low population density, which makes freight comparatively more expensive. Once it has a local base, Amazon will have to start charging GST, and also paying Australian labour costs.  

For all of the hype, Amazon has not won every category just yet. In the USA and UK, beauty specialists continue to grow strongly, thanks to brand selection, value-adding, community interaction, and a category-specific customer experience. A tough competitor makes us all strive to reach new heights – we certainly welcome the challenge!

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