OPINION: AMAZON'S ARRIVAL DOES NOT MEAN RETAIL ARMAGEDDON

By Barry Urquhart May 02, 2017 Industry features & issues

Is the arrival of Amazon really going to be disastrous for Australian retail? Strategist, consumer behaviour analyst and conference keynote speaker, Barry Urquhart, shares his thoughts.

 

Amazon – river of change

Be aware. Be prepared, but not alarmed.

The impact and consequences of the pending arrival in Australia of Amazon will extend well beyond the expectations of many local business leaders.

A disturbing 72% of owners and managers who participated in a 700 person February, 2017 survey stated they were not concerned about the introduction of Amazon in Australia, and would not be affected by such.

Implicit in such responses were the belief and perception that the product/service range of Amazon has primarily focused on books, compact discs and, more recently, fruit and vegetables.

Wrong. Wrong. Wrong.

There are few businesses in Australia that will not be subjected to changing forces, and thus, demand.

Retail pharmacies, tyre outlets, travel agencies and even Australia Post will need reflect on, and plan for, their “altered future”.

Consumers, including Australians, are already purchasing on Amazon platforms household items, electrical goods, furniture and a host of other merchandise and services.

Indeed, hundreds of Australian businesses, families, couples and individuals have use and will continue to use the Amazon channels to conclude sales, both locally and globally.
 
Buyers' expectations
The primary target audience for the Amazon Australian initiative will be consumers.

Their positive experiences will change forever expectations, buying routines, brand preferences, pricing structures and delivery demands.

Thus, the competition will be direct and consequential; those business entities that do not meet, and exceed, standards will experience considerable and ongoing sales and revenue leakage.

In short, the prevailing and pervading business models throughout the commerce sector – many of which have their genesis in the 1950s and ‘60s – will quickly become obsolete and redundant.

The fallout from resistance to change will become conspicuous, and costly.
 
The new norm

Multi-channel and omni-channel supply lines and communications will be imperative.  High-impact, laser focus, personalised and consistent stories will be key and compelling characteristics.

Around-the-clock access to information, purchases, payment systems and delivery offers will be pre-requisites for sustainable competitiveness, preferences and success.

Enhanced productivity, sales velocity and time-measured responses will rapidly become essential KPIs (key performance indicators). One-touch management practices will extend beyond logistic operations and warehouses. Inventory monitoring and minimisation will enable retention of optimised profit margins.

And prices? They will inevitably fall, to the benefit and delight of consumers.

In the United States of America, the evolving presence of Amazon has reportedly been instrumental in Walmart, the largest trading group in the world, lowering retail prices by 9% during the past year. 

It is the latter entity’s ambition to be at 15% cheaper than competitors. That is now a “stretch” goal.

Activity is apparent in cost-cutting, renegotiations of supply contracts and heightened accountability of team members for sales performances.

The challenge exists, has been accepted, and continues. There will be an awakening of such in Australia among the survivors and thrivers.
 
No-one is immune

Bunnings is, justifiably, a much lauded Australian business. It too will not be quarantined from the force and presence of Amazon.

For example, the Bunnings website is largely inert. Consumers can not transact sales, make payments or elicit immediate, direct and personal responses.

Richard Goyder, outgoing Chief Executive of Wesfarmers, owners of Bunnings, recently made a telling statement. He effectively said that Amazon will eat us for breakfast, lunch and dinner. That is a sobering declaration.

It is conceivable and probable that Amazon will identify this as a marketing opportunity. After all, on-line business is its forte.

Supply agreements will be sought, be received and will evolve possibly from hardware buying groups, marketing networks, manufacturers, distributors (many of which will have been denied access to the existing bricks and mortar stores) and, yes, from individual independent hardware operators.

Amazon, like UBER, is a channel, an application and an alluring retail supplier, which has an unbroken 10-year record of increasing sales and share price increments, a market value which exceeds $US400 billion – and has never recorded a profit. All surpluses are reinvested into the business, and its pursuit of continuing growth.

Australian electrical appliance retailers are particularly exposed. In 2017, some 18% of sector sales are on-line. That is the highest of any category in the nation.

Consumers are clearly accepting the offers, the brands and the delivery details.

The commodisation of many products, models and services has accentuated the importance and appeal of lower prices. Store loyalty becomes a fading memory.
 
Geographic isolation is no protection

The nature of Amazon and on-line retailing is such that they are accessible to all, at all times.

Businesses operating in regional and rural localities are not protected from intrusion.

Indeed, restricted trading hours in specific areas can be, and have been, the catalyst for local consumers to seek out alternative, available, accessible and responsive supply sources.

Self-interest and the wish for instant gratification generally override considerations for, and the influence of loyalty, relationships and the co-operative spirit.

Business needs to be fought for, and won, consistently and persistently. The key components of value have changed, and are changing. Mobility, accessibility and responsiveness are foremost factors.

Overt personal expressions of gratitude for the businesses remain important, and reinforce the “correctness” of purchase decisions among some people.

However, in the contemporary marketplace, recall fades rapidly.

Even playing fields abound. Relationships can and do marginally tilt the ground in the favour of some.

However, that “tilt” is less pronounced than in the past.

Pragmatism, complemented with a philosophical touch is needed for the new, and prevailing reality.

Time to recalibrate

All is not lost.

Those who rise to the challenge, will re-engage with existing, prospective and past customers and clients, study and analyse the current buying criteria, negotiate new supply agreements with manufacturers, distributors and suppliers, seek out mutually rewarding collaborative initiatives, enhance supply chains, improve distribution services, upgrade premises and invest in the training of team members to elevate customer service standards will present an attractive and compelling value proposition.

The good times are over.

There is no place for complacency, naivety and indifference.

Better times are ahead.

With the pending arrival of Amazon ... just go with the flow.

 


Barry Urquhart of Marketing Focus is an internationally respected business strategist, consumer behaviour analyst and conference keynote speaker. Contact him on 00 6141 983 5555, or 00 618 9257 1777 or by email: Urquhart@marketingfocus.net.au

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