Looking at the reactions of many large retailers, it’s clear Australian businesses are completely spooked by the thought of Amazon setting up shop on our shores. Most are falling back to the old tactics of lowering prices and boosting their product range – Myer’s relaunch of the Bargain Basement and KMart’s discounting strategies show this. And we can always rely on Gerry Harvey to launch his usual “Get off my lawn” rant. But is there another way? Graham Jackson from Fluent Retail says there is.
Jackson says Amazon’s local entry could be a good thing for local markets and customers.
“I don’t think retailers need to be scared. They could be embracing some more opportunities this brings. It puts a bit more focus on digital channels, the retail pie could be increased,” he said.
As GDP continues to grow, Jackson says this is reflected in people often having more money to spend. So, even though spending is shifting from bricks and mortar stores to online channels, people are also spending more money than before.
That means opportunities for retailers are actually better, particularly as Amazon raises awareness of online channels. But for retailers that aren’t ready they could get “spat out the back if you’re not up to par with what customers expect is a good retail experience,” he added.
It is inevitable that shoppers will flock to Amazon initially as they enter the market as curiousity will be high. But if the experience of buying from Amazon isn’t superior to that of local businesses, that early sales hump – which has occurred in every other market Amazon has entered – could be short-lived.
“It’s not who’s cheapest wins. it’s who’s fastest and easiest to do business with wins,” said Jackson. “The faster and easier you are to deal with the more likely people are to buy from you. And people will pay for convenience”.
Many retailers today see their in-store, online and channels separately. As a result, they would split their stock resulting in a fractured view of inventory. But by doing the work now to have a single back-office that sees all sales channels through a unified view, retailers can prepare for Amazon and other online marketplaces.
So, how do you out-convenience an Amazon?
Jackson said Amazon’s biggest Achilles Heel is their distribution network. Having large, centralised warehouses means shipping products could take time and come with high costs.
“An Australian retailer with several stores has the opportunity of using that store network to be faster and more convenient than Amazon with one central warehouse,” he said.
This will require a significant change in how operators see their business. Stores can become combination shop fronts, warehouses and distribution centres. When a customer orders a product, it could be shipped or collected, if the customer prefers, faster than Amazon.
“Their problem is they’re typically unable to use stores as mini-distribution centres. there aren’t easy processes for staff to handle this,” he said.
It’s critical to think about the staff experience as if it’s not right then the customer experience will suffer. This starts with having inventory systems that make it easy for staff to know what products they have, the quantities and locations. Logistics are a challenge but this can be overcome by partnering with experts to cover everything form long distance to last mile.
For Amazon to compete, they’re would need warehouses in each state but also stores for easy customer returns and for “click and collect” services.
“If you can do nothing else, make yourself more convenient than the next guy. People will pay for convenience,” said Jackson.
It’s also important to note Amazon is both a retailer and a marketplace. Jackson says that as well as getting your own store ready, there’s no reason why you can’t use them as another channel for your own business. So, as well as selling through your own bricks and mortar store as well as offering online and click and collect services, you can sell through Amazon.
Until Amazon enters Australia, retailers need to figure out how to offer more than just range and price, said Jackson. He added that many retailers are of the view that Australian are just price conscious and will only shop on price.
“In the absence of any of any other value proposition, you buy on price. But there are many other reasons why I don’t buy the cheapest version because I put the value on trust, speed of delivery. There are value propositions that are outside price that many large retailers don’t consider”.
When you look at Amazon’s advantage, it’s not about price and product range. Almost anything you can buy from Amazon can be found somewhere else and, often at a lower price. Where they beat most businesses is on their ability to make the sales process as simple as possible for customers and by shipping items quickly.
This is where it’s possible to take Amazon on. By exploiting the advantages a local bricks and mortar presence offers, and getting sales and distribution processes streamlined, retailers can offer a higher level of service and convenience to customers.
It’s inevitable Amazon will have some short term impact on Australian retailer during the launch hype. But by optimising your customer experience now, it’s possible to out-convenience Amazon and beat them at their own game.