According to most industry commentators, Amazon’s imminent arrival in Australia is bad news for local retailers. Undoubtedly this will be the case for some, but certainly not for all.
Amazon is coming and it plans to destroy Australian retail.
Amazon is coming and will capture 14% of online retail sales within 5 years.
Amazon is coming and your business is f*cked.
All feels a bit grim doesn’t it?
Of course, it’s not just Amazon that retailers are fearful of. Retail growth has been soft for the last couple of years fuelled by a decrease in consumer confidence due to weak household income growth, fears over the housing market and the continual threat of Australia’s first recession in 26 years.
Is it time to shut up shop and go home? Don’t be silly. Retail has been through tough times before and often comes out the other side stronger.
The general mood at the Online Fashion Success conference in Sydney this week was a lot more positive, despite the discussions moving to Amazon again and again.
Packed with case studies from Showpo, Flora & Fauna, Disrupt Sports and Spell and the Gypsy Collective, all of whom are growing fast largely due to delighting their customers, and interesting insight from Oracle+Bronto and PwC, the event provided a new perspective on the changing tides of retail in Australia. Here’s some of what I learned at the conference:
Despite the temptation to draw comparisons to the US or UK, where Amazon is already established, the Australian consumer is unique. According to presenters at the conference, Aussie shoppers value price over convenience when shopping online compared to other global markets such as the US and UK.
This may be due in part to the fact that Australians are used to long delivery times. The price of delivery is often a pain point, with delivery sometimes being equal to, or more expensive than the product being bought. This has resulted in price-conscious Australians often buying from overseas retailers, including Amazon. Still, Amazon can be a pricey experience in Australia – but when the company formally starts up here, bringing warehouses in Australia with it, it’s going to be a very enticing offer – it’s no wonder some retailers are nervous.
So what can online retailers do to win today and in the future? Paul Zahra – PwC Global Retail Advisor and former CEO of David Jones gave three pieces of advice.
- Have a unique value proposition
- Think global
- Be omnichannel
The first two points I wholeheartedly agree with, and there are lots of examples of online businesses finding ways to make themselves stand out from competitors and appeal to a worldwide consumer audience.
RELATED BLOG: Best practices for PPC shopping campaigns
For example, Zappos sees itself as a customer service company. That’s its value proposition and it seeks to do that better than anyone else. Their loyal customer base is the reward for. Toms.com donate a pair of shoes to someone in need for every pair they sell. Flora & Fauna sell only products that are 100% vegan and cruelty free and support a local animal sanctuary, donating 10% of sales from certain products. From a business perspective these kinds of initiatives make sense not only because they are the right thing to do, but also because 93% of millennials want to know how brands they buy from are improving the world. With eco-friendly missions such as these, companies can appeal to a wide set of consumers around the globe.
Australia is a big country with a relatively small population. Retailers need to go beyond the local market. China clearly presents a huge opportunity, but doing business there is hard due to the obvious language barriers, finding the right partners and navigating laws and legislation. Other English-speaking countries are the obvious place to start.
Google have some interesting developments coming down the track, especially with their Shopping product, which will help retailers reach more customers across the globe.
I’m not as convinced, however, by Paul’s third point – to be omnichannel. While every good retailer needs a strong presence online, including on social media, in today’s world there’s no need for online retailers to get into bricks and mortar. True, there are some good examples where this approach is working well. Online retailer Mon Purse has built out concessions in Myer, Bloomingdales in the US and Selfridges in the UK, which allow customers to get hands on with the products before ordering online. This has helped to fuel growth.
Pop-up shops on the other hand are more accessible and continue to grow in popularity as they provide a relatively low cost opportunity to engage with customers face to face as well as create additional PR.
That being said, there’s no reason a company can’t exist entirely online, particularly if they sell products that don’t require physical interaction as a major part of the buyer funnel. If a brick and mortar location eats into revenue, then scrapping stores can be a smart move – provided your online experience is optimised, consumer-friendly, and agile.
I’ve add a couple more to Paul’s list:
Focus on the Customer
A good example of a traditional retail business kicking goals online is Fantastic Furniture, who earlier this year introduced a click and collect guarantee that in stock products will be available to pick up in under an hour.
Compare that to JB HiFi who state on their website that If an item is ordered before midday, it should be ready for collection the same day. If an item is ordered after midday, it should be ready for collection the next day.
That’s not making a customer’s life easier.
Partner with Amazon
PwC presented stats from their Total Retail 2017 survey, which included the top four countries where consumers “shop less often” at retail stores due to Amazon.com. Looking at the chart below, it’s quite a chunk of market share they’ve taken.
Today, more than half of all online product searches start on Amazon. That’s an incredible – and intimidating – stat. With that in mind, retailers should be thinking about the opportunity Amazon presents, not just the threat.
Amazon Marketplace enables third-party sellers to list their own products alongside Amazon’s regular offering. According to Amazon CEO Jeff Bezoz, close to 50% of the units purchased on Amazon.com are from third-party vendors.
Amazon’s advertising solutions provide a pay-per-click model similar to Google and promotes products to people who are actively searching for them on Amazon.
Together with their Fulfilment by Amazon service, Amazon is bringing solutions to many of Australian online retailers biggest challenges, including new customer acquisition and third-party logistics.
Amazon’s arrival in Australia is a definite opportunity for those operating in what Paul Greenberg calls New Retail. Only time will tell which of those in Old Retail will adapt and change to the world around them, and which ones will fall behind.
Looking for more advice on how to get ahead as an online retailer? Check out our blog on 5 ways for retailers to get more out of their digital efforts, or get in touch with Croud.