The worst kept secret in Australian commerce is now official: retail juggernaut Amazon is coming to our shores, bringing some seismic changes to the market along with it.
To give some perspective on how big Amazon actually is, it’s important to understand the sheer scale of its global operation:
- Amazon’s global net sales grew 23% in Q1 2017 to USD$35.7bn. Q1 is arguably the quietest quarter of the year for retail.
- Amazon accounts for 43% of online retail sales in the US.
- An average of 84% of internet users in the UK, US and India accessed Amazon’s e-commerce platform in 2016.
With roughly only 7% of all Australian retail sales taking place online, Amazon has the potential to fill a huge vacuum. While this may strike fear into Australian retailers, those who are prepared to adapt and learn will be poised to capitalise on the trends that will follow Amazon’s entrance in the market.
Same Day Delivery
Amazon now delivers in only one hour in some US cities – something that is likely going to follow suit in Australia. Due to this, customers are more demanding in their must-have-now attitudes, meaning Australia’s “delivery within 3-5 working days” just isn’t going to cut it anymore.
However, leading online retailers such as The Iconic and Koala already offer metro area delivery within 4 hours and are seeing huge benefits as a result. One way forward for retailers would be to increase adoption of Australia Post’s Parcel Locker service or offer better incentives for click-and-collect customers. With small changes, retailers can improve the delivery experience and better compete into the market.
Becoming More Agile
Globally, Amazon focuses resources on analysing user behaviour and on-site testing. While Australian organisations may not have the same manpower, retailers can adopt more of a test-and-learn mentality to drive stronger online sales. Australian retailers can look to Amazon’s agile efforts for guidance on their own activities.
For example, retailers can conduct more A/B testing, look at online personalisation or partner with other organisations to gain more insights into buyer behaviour. Ultimately, Amazon’s entry into the AU market only gives current retailers more opportunities to learn and adapt.
Last, but certainly not least, is price. Amazon offers relentlessly competitive pricing and is able to do so because the size of their operation allows them to swap high margins for huge volumes. Realistically, Australian retailers may never be able to match this aggressive pricing; however, they can focus on other aspects such as customer experience, quick delivery and encouraging sales of Australian-made products.
Whether we like it or not, the global force that is Amazon will be quickly hitting our shores, so it is now more important than ever to establish strong retail strategies, increase focus on customer experience, and ensure we offer a true online-to-offline experience. As said by Albert Einstein “insanity is doing the same thing over and over again and expecting different results.”
If you want to know more about growing your online retail channel in Australia, reach out to the Performance Horizon team today.