With Amazon officially launching in Australia on Thursday, local retailers are being forced to lift their game. We have seen some large businesses already change their strategies over recent months but that shift has accelerated with one major retailer adding same-day delivery to their service.
JB Hi-Fi has bolstered its delivery options with same day and three-hour options. Which begs the question – why didn’t they offer this before? It’s not like courier services are a new thing so it could have been available years ago.
The only reason I can come up with for not offering these options is that JB Hi-Fi didn’t think it needed to because its competitors didn’t.
When I spoke with Couriers Please COO Hoy Yen Hooper earlier this year, she noted that Amazon would need to get its supply chain game in order before being a serious player in Australia. And everyone’s favourite retail curmudgeon Gerry Harvey said it would take Amazon years to get serious here.
Given JB HiFi’s reaction, it seems those years could be more like weeks.
What we are seeing is good, old fashioned market disruption. If you look back at retail in Australia, until the 1980s most of our retail was centred on big city department stores and an ecosystem of speciality outlets that swarmed around flagship outlets. But, in the 1980s, large suburban malls started to grow.
The result has been a shift in retail spending patterns. Why spend an hour getting to the city and paying exorbitant parking fees – I was hit with a $90 fee for three hours in Melbourne’s CBD recently – when you can jump in your car or local public transport and get to a large mall that has pretty much everything the CBD has to offer?
But that shift was gradual and suited retailers. It was a transplant of their existing model. Most large shopping centres have some flagship retailers and the same franchised specialty stores with a few, smaller independent retailers thrown in. But they are making life harder for shoppers, and not easier, as more suburban shopping centres introduce parking fees.
Online retail has completely decimated that equation. Why travel to a shopping mall and pay for parking only to find the product you want isn’t in the store? Amazon, with its warehouses and ecosystem of partner retailers can easily match or beat the price and range of any High Street retailer. All that retailers have left to compete on is service and logistics.
Which explains JB HiFi’s move.
If you want some idea of what Amazon will do to local retailers who don’t smarten up their game, take a look at Foxtel and what it has had to do with the rise of SVOD (Streaming Video on Demand) services.
Foxtel’s subscription service has degraded over the years. The attraction of dozens of channels with no ads disappeared a long time ago. While there’s lots of content on Foxtel, it’s infused with commercial breaks and the monthly costs and sometimes flaky hardware (anyone with an iQ3 box will testify to that). In comparison, Netflix, Stan and others that have come and gone let you watch what you want, when you want, without ads at a much lower cost.
SVOD services forced Foxtel to change their operating model. Faced with competitors that offered great range, better service and lower prices, Foxtel was forced to evolve, eventually offering Foxtel Now as a streaming service for their content it is licensed to deliver at a lower cost than before – did ever expect Foxtel to offer a $10 per month subscription?
Even if you never shop through Amazon, you will reap the benefits of the company’s entry into Australia. They will force other retailers to improve their service.