Post by Zac Godkin, Head of Performance Media, Performics
Amazon will be launching in Australia at the end of 2017, causing many local retailers to sit up and take notice.
For example, Wesfarmers has abandoned plans to float Officeworks for $1.5 billion, due to uncertainty around the ‘Amazon effect’ alongside weak discretionary spending (AFR). Additionally, Credit Suisse report, that tips retail stalwarts like Myer and JB Hi-Fi, will lose as much as 55% in revenue over the next five years as Amazon gains more market share.
These predictions come from other countries’ experiences, where Amazon has stolen sales – and negatively impacted profitability – from other established retailers (ABC). Yes, Amazon is going to shake things up. But read on to see how retailers can make the most of this opportunity.
For consumers who love a great deal, Amazon’s arrival is very exciting. The retail giant has built its empire on low prices, fast shipping and a huge product range. There will even be an Australian version of its premium ‘Prime Now’ service, where customers pay an annual fee of about $100 for fast, free shipping and other perks.
Australian consumers have always been able to browse and shop on Amazon’s US online store. By creating an Australian online store – and spending hundreds of millions to set up a state-of-the-art Australian warehouse and dispatch center – Amazon is bringing wider choices and much faster delivery to these consumers.
Just as Uber turned the taxi industry on its head, Amazon is certain to shake up the Australian online retail scene. Along with low prices and faster delivery times, Amazon is also at the pinnacle of user experience. In the US, 58% of consumers leave retailer sites for Amazon for this very reason (BloomReach).
As more Australian shoppers get a taste for the Amazon experience, the collective bar will raise – other online retailers will need to offer similar features and benefits, like fast shipping or a more consumer-friendly return policy. In short, shoppers will soon expect more for less.
Traditional retailers do need to be ready to fight. Amazon is notorious for putting growth ahead of immediate profits – it’s not afraid to take an aggressive approach to steal market share.
Opportunity For Retailers
Amazon’s arrival is a great opportunity for brands to play into their strengths and hone the things they do well.
Many shoppers are very brand loyal – so brands should treat regulars like royalty to ensure they’ll come back for more. Retailers need to scrutinize delivery times and rates – and negotiate a better deal with freight companies. Retailers should focus on enhancing their overall user experience onsite. They need to find ways to innovate and automate, to cut costs or capture new customers.
There are definite positives to Amazon’s arrival in Australia. It gives retailers another channel to sell to and connect with potential customers. Brands may find that Amazon offers cheaper margins than more traditional channels, and may see more products fly off the shelves.
Plus, added competition for online advertising dollars doesn’t hurt, given Google and Facebook’s dominance in this space. In the US, 55% of consumers make their first product search in Amazon (BloomReach) – putting Google in second place for this category – something the search giant is unaccustomed to! Adding Amazon into the digital marketing mix provides retailers with more avenues to explore, ensuring they’re getting the best bang for their buck.
Retailers need to take immediate action. Some key opportunities include:
- Gathering market and competitive intelligence
- Understanding the Amazon marketplace and platform
- Reviewing current advertising opportunities and thinking about test ideas and budget allocation
- Asking customers how you can improve your current user experience
Above all, retailers have an amazing opportunity to get their online store and broader retail strategy in the best shape they can, so that when Amazon arrives at the end of this year, they’re ready for it.
To drive performance on marketplaces like Amazon, contact Performics today.