January 3, 2017
What Amazon’s Arrival Means for Australian Retailers
Whether or not Australia’s online and offline retailers realise it, the bar for them has just been raised. With the recent news that Amazon plans on opening distribution centres in every state across the country from September 2017, it’s pretty clear the Australian retail landscape is about to change… drastically.
Consumers are set to be the big winners, with sources claiming Amazon is set to undercut local prices by up to 30%, while of course offering up services like Amazon Prime delivery that will significantly cut ecommerce delivery times. Consumers will have more choice, at lower prices, delivered faster than ever before.
Now if that doesn’t send shivers down the spines of traditional stores, ecommerce retailers, and fulfilment companies operating in Australia, nothing will.
Retailers across Australia, both big and small, have traditionally pushed back when consumers or industry advocates claim that ecommerce deliveries in Australia are too expensive and too slow. They’ve claimed that Australia’s vast distances and low population density are the reason why that toaster you bought online will cost $15 for delivery and take two weeks to arrive. It’s highly likely that, almost overnight, Amazon is going to take that excuse away.
For those Australians unfamiliar with Amazon’s ecommerce offering, let me try and explain. Depending upon the market, Amazon offers differing levels of products and delivery options. Some products, in particular high volume products, are offered as “Fulfilled by Amazon” themselves, which means they’re often eligible for Amazon Prime or Amazon Prime Now delivery (in other markets, that means overnight or “within the hour” delivery respectively, although it does vary a bit by geography). For products at lower volumes, sellers can list their products on the site but still send them independently (kind of like how eBay stores in Australia currently operate).
Amazon’s able to do this because it does one thing really, really, well; fulfilment. It knows exactly where to place distribution centres, forecasts sales to ensure stock availability and does everything in it’s power to constantly drive down its own supply chain costs. When you compare this approach to that of Australia’s largest retailers, who in many cases are still fulfilling online orders by taking products off the shelves in actual storefronts, it’s no wonder their costs are lower.
Like with most major retailers, Amazon now also stocks house brands (like the supermarkets have their own brands) on all sorts of everyday household basics. Again like other retailers, they have a huge range of complementary services that are bundled in like Amazon Prime Video (similar to Netflix), the Kindle Library, PrimePantry and more (again, all varying by market). For consumers, getting all this from one place for a flat annual fee (the AUD equivalent of overseas pricing is $100-140) is likely going to be an excellent proposition.
So the question then becomes, how do Australian retailers compete?
Fortunately, at Reload we’re very used to competing with the likes of Amazon, as our London office has been doing exactly that with our clients in the UK for over five years. The good news for Aussie retailers is that it’s very possible to compete, but only if you’re willing to pick up your game where it counts. To that end, I’ve compiled my list of top four priorities for any Australian retailer preparing for Amazon’s arrival.
1) Sort Out Your Shipping
As flagged previously, Amazon’s Prime offering will mean consumers will be able to have an unlimited number of products delivered to them overnight (or very close to it) for a flat annual rate. Expectations amongst the average online shopper will increase exponentially. Pretty soon your “$20 surcharge, untracked shipping and 2-4 weeks to arrive” delivery option is going to not just put off customers, but stop them entirely.
The time is now to start re-negotiating with your existing fulfilment company, and reviewing your own delivery processes. Remember that Amazon’s arrival is likely to hit the fulfilment companies already operating in Australia hard, so they’ll be keen to lock in customers and hopefully be willing to do a deal, depending on your volumes. Start the conversations early, not when things get bleak.
2) Fix the Online Checkout
One of my personal bugbears with the average Australian online experience is how badly designed most online checkouts are. Shipping times and costs are often hidden until after you get through to the payment window, availability of products aren’t clear, you’re forced into registering an account, or asked to fill in needless extra fields about age/gender or other unnecessary information. The list goes on. For Australian shoppers right now, we put up with those things. When Amazon arrives, we won’t be so forgiving.
What Amazon do well, and what you should look to replicate, is that every product on their site has delivery costs and timeframes clearly displayed next to every search, on every product details page and throughout the checkout. You know exactly what you’re buying, how much it’s costing to get to you (most of the time that’s free thanks to Prime) and when it’ll be arriving (typically overnight). Your checkout needs to be that simple too.
3) Up Others Areas of Customer Service
As those who’ve bought from Amazon before will know, once you buy a product and get it sent, the process whirs like a well oiled machine. However, that’s not necessarily the case at other stages during the customer journey, particularly if you have other questions.
Think about what other areas of customer service are important to your customers. Will the clothes fit me? What should I match it with? How does this product work? How quick is the instal? Would you recommend it for this use?
Those sorts of high-involvement purchases are where most retailers with excellent customer service have the edge over Amazon’s offering, but many don’t make the effort to replicate that service online. Now’s the time to seriously consider other website enhancements designed to improve “digital” customer service across live chat, social media, interactive sizing, or anything else that can improve the experience for the user. It may be your only point of difference if you don’t want to be competing on price with Amazon.
4) If You Can’t Beat Them, Join Them
Some of you may be looking at the above items and thinking “there’s no way we can do all that just to compete” and for many (particularly smaller) retailers, that may well be the case. One final option to consider is to actually reach out to Amazon about being “fulfilled by Amazon” yourself.
That would mean that rather than trying to compete with their machine, you’d be part of it, with your products available to Amazon’s customers, purchasable through the site, and then shipped out in a timely manner via their distribution network. Keep in mind though, this will cost you a decent chunk of your margin.
So there you go, Amazon’s coming and Australian retailers are rapidly running out of time to be ready. Of course, you could always ignore it all and hope Amazon change their mind about coming to Australia, but don’t say I didn’t warn you…