How Amazon Australia Will Affect Existing Supply Chains

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Amazon’s entry into the Australian retail next year is already hitting retailers hard. But it’s not just bricks and mortar stores that will be hurt. All those goods Amazon will be shipping, either from their own warehouses or from resellers who take advantage of Amazon’s market place will need to get to customers like you and me. That means warehouses, planes and trucks will be needed - and it will put entire supply chains and logistics providers under new pressure.

Couriers Please’s COO, Hoy Yen Hooper, points out that Australia’s geography and population distribution is far different to that of the US, Amazon's home market. That means the company will need to create relationships with local logistics providers.

“It will take Amazon a fair while to get their head around this. More than half the population is based on the Eastern seaboard and the distances are broad. It takes longer to fly from Sydney to Darwin that it takes to get to New Zealand,” she said.

To cover those distances, Hooper says it’s likely Amazon will negotiate with some key players in the market to support their Australian efforts. That will mean scanning the market to get a feel for it and then to partner with a small number of key providers to assist them with getting goods across the country promptly.

If they can’t find partners that fit strategically into their customer-centric model then, Hooper speculates, that they may look to build their own distribution network.

For local logistics companies, Hooper says there’s no doubt there will be opportunities that come from Amazon’s retail entry.

“It will provide tremendous opportunities for logistics companies to increase volumes on the delivery network. There may be pockets that they can’t service or we can increase service density. And we can optimise our network. It will challenge current providers to improve their delivery capabilities - that’s for sure,” she said. ”This will create opportunities for Amazon, particularly in areas that aren’t well served today”.

Hooper says the focus for courier companies has been to collect the parcel and get it to the destination. Services such as faster delivery times and package tracking have been added, either as value-add (paid) services or in response to competitive pressure.

“It goes without saying customers expect more than just delivering a parcel. They want realtime tracking right from their phone”.

Amazon, she says will challenge courier companies to improve services and reduce costs. For example, Hooper said Couriers Please has embarked on a program, they have codenamed “T-20”, to review their entire operation and better prepare for the e-commerce onslaught Amazon will drive.

“This is a program of projects we are undertaking over the next 20 months to transform us into becoming a key player in the e-commerce delivery landscape”.

Hooper says that while there has been a lot of focus on improving supply chain operations, there needs to be a further shift to put the customer’s needs first.

“The supply chain needs to put the customer at the heart of everything they do. From the process of how they resolve problems, customer service - the future of the supply chain is all about responding to customer needs”.

This is where, I think, many retailers are missing the big picture. With a focus on price, as evidenced by the ongoing bleating about GST, the real issue is customer service. And logistics are a key, if sometimes understated, part of Amazon’s secret sauce.