From humble beginnings running Amazon out of his garage, Jeff Bezos has managed to turn his company into one of the largest in the world, with an estimated market value of over $US500 billion. In the US around 43% of all online sales now go through Amazon, and with the retail giant planning an upcoming launch into Australia, local retailers are going to have to innovate in order to stay ahead of the competition.
In recent months Amazon has announced the lease of a 24,000 square meter warehouse in Dandenong South, which is likely to become the first of many “fulfilment centres” in Australia and with plans for their launch moving quickly, you can expect Amazon to start operating some of its services within Australia as early as November 2017. But what exactly are these services and how will they impact local retailers?
Amazon Marketplace will likely be one of the first services they offer in Australia, a platform that enables third party sellers to sell their goods on Amazon’s website. These third party sellers have the option of handling the warehousing, picking, packing and delivery of their goods themselves or they can let Amazon handle all those aspects for a small fee. This gives smaller retailers the opportunity to access Amazon’s huge customer base through their website as well as take advantage of their speedy delivery times.
Having already launched their online subscription streaming service Prime Video in Australia, their next step will be launching their full Amazon Prime service. The full subscription service includes all the features of Prime Video but also gives customers free 2 day shipping on all goods bought from Amazon. High shipping costs are the main cause of people abandoning their online shopping carts, so this subscription service will not only save consumers money, but also encourage them to do more of their shopping online.
It’s the convenience and popularity of these services that has other major retailers shaking in their boots. According to some reports, Amazon coming to Australia could result in them taking a $12 billion share of Australia’s retail sector, putting pressure on retailers to make their services and products cheaper and more convenient. It’s Amazon’s customer focus that sets them apart from their competitors, with owner Jeff Bezos being famous for including an empty chair (meant to represent the customer) in every board meeting. It’s that focus on customer experience that other retailers will need to learn from if they want to compete with the global giant.
It’s not all doom and gloom for businesses, small to medium enterprises will have the opportunity to utilize Amazon’s warehousing and delivery services, helping them cut down on their own costs. Rather than spending big on their own warehouse or staff, SME’s can get Amazon to provide those services at a fraction of the cost of setting it up themselves.
The arrival of Amazon into the Australian retail market will certainly shake things up, but with proper planning and innovation retailers should be able to compete.