Amazon and the rise of the marketplace (and guess who’s back?)
Amazon’s launch in Australia was a bit of a fizzer; but will it be second time around?
Many Aussie retailers continue to be running scared, moaning, putting their heads in the sand or stepping up with Amazon’s entry into the market. Heralded as an “apocalyptic moment” for Australian retailers it has turned out to be a bit of a fizzer.
Due to technical problems, Amazon Australia missed what is traditionally its largest sales day of the year, Black Friday. Now they are gearing up for a second go on Boxing Day with “limited time offers.” Marketplace sellers have been told they “expect a minimum of 15 per cent off an item and ideally the larger the discount the better for our customers.”
A leaked memo from Amazon revealed, “We want to offer our customers the best deals possible to choose from so we can create history for the first Amazon Christmas period in Australia.” Sellers would have to guarantee a minimum of 100 products on sale to qualify for the Boxing Day sale, and a maximum delivery time of 10 days — addressing two key complaints about products listed on the company’s Australian site so far.
Amazon is here to stay. It’s a reality and it’s something everyone needs to be prepared and ready for.
But what does it mean for us on this side of the ditch?
And is Amazon really a threat?
Amazon has had a strong presence via sales shipped from offshore or through their AWS (Amazon Web Services) business on both sides of the Tasman for some time. But it would be fair to say that I don’t believe it will have the catastrophic impact in our market based on the Amazon business model. In particular, the marketplace business and full-service solutions; Amazon Prime, Amazon Fresh and Amazon Go.
Amazon Fresh Pick-up solves the customers pain point and has another touchpoint into the household
What we are going to experience is the Amazon Marketplace, which is simply a slightly better version of what we already get in NZ with some better shipping costs and speed.
Why? The power of Amazon is through their full-service offer. By rolling out Amazon Prime, Echo-Look or Amazon Fresh for example, the company infiltrates the home through their subscription offer and extensive services with everything from priority shipping, collect pick-up sites through to exclusive content access. This year, Amazon will spend $4.5 billion on original television content, second only to Netflix, who increased their budget to $2 billion when they heard Amazon's footsteps behind them. Amazon is a behemoth for more than simply their Marketplace offering – and that is the game changer for shoppers.
Amazon Prime opens a world of possibilities from entertainment, shipping benefits and member exclusives.
However, there has been movement in the marketplace and online sector and it will be more interesting to what the impact it will have.
Trade Me is having to reassert its position in the market and recently trial unlimited shipping to a selected audience within NZ.
Amazon Marketplace, like Trade Me, it offers a platform for buying and selling goods. A massive difference for sellers is that Facebook's service is free, while sellers are charged a fee on successful Trade Me sales.
Kogan is one of Australia’s largest online retailer and will continue to drive growth through NZ and their relaunch of Dick Smith.
But players are emerging to mix it up and keep local retailers on their toes with the likes of Kogan.com and their relaunch of Dick Smith in our local market.
Rising from the ashes, Dick Smith is back once again thanks to Kogan
With everything from power tools to luggage (and a fat free chip maker if you are looking for a Christmas stocking stuffer), they are likely to kick more butt here than Amazon in the short-term, due to their capacity and capability already established on the ground.
Last minute gift ideas for someone you love this Christmas thanks to Dick Smith
The competitive landscape is fierce and it isn’t simple. To be frank our geographical diversity and the infrastructure requirements required to service a market of 4.7 million (or in the case of Aussie which is 24 odd million and a geographical labyrinth) won’t necessarily be attractive to conquer.
I think the Trans-Tasman markets will be hard yakka for Amazon. But it doesn’t mean we should be complacent. What this entrant brings to our (at times) pathetic and complacent retail ecosystem, is a shake-up. Retail leaders will need to revitalise, curate strong offers and customer experiences. Retail is a deeply social activity. Good retailers connect with the customer they serve and are a vibrant contributor to the ecosystem they operate in.
Remember, Amazon is a large and efficient retailer and can do many things cost-effectively. They will also appear cheaper to New Zealand shoppers who will benefit from not paying GST on their imports under $400.
What do you need to consider to be prepared?
Ensure the customer is at the heart of your business. Most retail businesses still DO NOT actually construct your strategy around the shopper and your team’s ability to get excited and be able to execute it.
Invest in better store experiences and a more integrated store and online platform
If you operate in a complex or regulated category, beware. When Amazon comes to town they are incredible at figuring out complicated problems and then making a small amount of money to take share.
And don’t forget the upside. For many smaller retailers, using Amazon as an additional platform is a way to get greater reach using the scale and efficiency of the Amazon infrastructure without incurring the fees they might currently experience on Trade Me .