Amazon in the land of Oz
Amazon is coming to Australia. Last reports say they’ll land before Christmas 2017. The day they open will not be the end of the world as we know it, but it will be the start of a major shift in Australia’s retail environment. How do we prepare for this paradigm shift? Toto, I have a feeling we’re not in Kansas anymore.
When looking to America for an insight of what can happen in Australia, the ‘flat earth’ believers say that Amazon will not have the same impact in Australia. I believe this as well but that doesn’t mean it’s going to be any easier on Australian retailers. I don’t believe the often raised geographic issues of Australia’s markets will be an issue for Amazon. There are bigger issues Australian bricks and mortar, online retail and producers have to worry about.
America is a mature consumer-centric retail economy. Amazon will bring years of online sales experience, faultless returns policy, extensive range, innovation and more concerning, very deep pockets to fund any strategic growth goals they want to achieve.
Recent history in America doesn’t bode well for bricks and mortar retail as it dies slowly by a 1000 cuts. JCPenney is closing 140 stores, Macy’s 100 stores, Sears 150 stores and HHGregg 88 stores as it prepares for bankruptcy. In all cases, these closures represent at least 10% of their respective retail outlets. The more stores close the more consumers aren’t being serviced with convenience and the faster the march towards Amazon with their omnipresent convenience and growing range.
Online competitors can’t rest on their laurels either. In 2016 Amazon represented 43% of all online sales and 53% of online growth sales in the US. A recent survey of 500 American consumers in December 2016 found that more than half (52%) go directly to Amazon. Even with new and established competitors in the e-commerce marketplace, none of them can match Amazon’s customer loyalty and brand awareness. To even stay relevant online retailers will have to work hard to build faultless digital experiences, targeted digital marketing and brand awareness to even have a chance to stay competitive. That said in many cases competitors will need to sell elements of their range through Amazon’s marketplace to ensure they share in Amazon’s growing market share.
What about fresh food? According to initial sales data, I’ve been surprised to hear that within its first week Amazon has sold US$500k of Whole Foods’ products, with most of the popular products selling out.
Amazon is beholden to no one. It has deep pockets to fund any strategy it sees fit. The full frontal assault will hit both traditional and online retailers heavily over the next few years as more consumers become familiar with online shopping and find Amazon’s online retail experience more convenient.
So what is the correct path on the yellow brick road we need to follow? For retailers and brands; big and small, online and traditional Amazon will lift the bar. To even stand a chance of competing your entire consumer experience and customer journey will need to be enhanced and perfected. From product quality to shopper journey, to effective machine learning (please don’t call it AI) and consumer targeting, to experiential and in-store environments; the quality of your product and how you engage with the market and consumers will need to improve.
Five points on how to take on the Amazon Witch:
– If you make an inferior product, make it better.
– If you offer inferior service, fix it.
– If you don’t have great packaging, change it.
– If you don’t have an effective marketing plan, make one.
– Then make sure all these points work together under a strong consistent brand and ensure your team shares a common goal and sings from the same hymn book.
The arrival of Amazon will force all retailers and producers to focus on the competitive issues that have always been part of the world of consumer retail and brands. That said, Amazon’s strengths are also its weaknesses. Amazon is big. Retailers (online and traditional) and producers need to focus, define who they are and communicate why they do it. They must have the passion and drive to work within a dynamic and changing market. The world has changed. Call them millennials or consumers, consumers are engaging with brands through digital platforms like never before. But remember consumers are still real people, not iPhone, iPads or computers. Humanity is based on storytelling.
Yes, there will be road kill along the journey on the yellow brick road. As we travel this long path only through innovation, best in class products and services, effective use of traditional and digital channels and engaging brands will you arrive at the Emerald City. The trick is how to combine all those elements so you can splash a little water on the Amazon Witch. Maybe not to kill her but a least to see the opportunity over the fear.
Love or loathe Amazon when they arrive in Oz they’re here to stay. But like the Wizard of Oz, there’s a lot of smoke and mirrors. The reality is there are strategies to make it back to Kansas.