The speculation is over – Amazon is coming. It has confirmed that it will launch physical retail operations in Australia with “Amazon Marketplace” platform for third party sellers.
The question now is: how should businesses respond?
Look beyond the headlines
Largely based on the US experience, most media commentators are predicting doom for Australian retailers.
Amazon has grown to such an extent that it seems unstoppable. Its stock market valuation is now over 20% greater than the four largest comparable U.S. retailers combined.
Sears, until the late 1980s the U.S.’s largest retailer, hovers on the brink of bankruptcy.
US Retailer Valuations
But not everyone’s outlook is bleak. For some players, Amazon Marketplace represents a once-in-a-lifetime opportunity to grow sales and profits.
And there are others who may not be impacted by Amazon at all. But for most, the impact will be complex, with different customer segments responding in different ways.
Start with customers and the big picture
Before deciding how to respond, the first step for leaders is to step back and understand the bigger picture in their sector – why do customers buy from them?
So how can you get a sense of the big picture and the likely impact of Amazon? You can think about it like this. Imagine you’re a retailer competing with Amazon, and they offer your customers:
- A wider range than you can offer
- Prices matching (or lower than) yours
- Free next-day delivery
- A simple online ordering process
- No-hassle fulfilment to the doorstep
If you can see why customers would continue to shop from you, then you may have something Amazon can’t match.
For example, if your customers need the help of your advice to make their purchase decision, or you’re physically located close to customers who value convenience, then you have a strategic sweet spot where you can play to win.??
Once you have identified Amazon’s potential to disrupt your market, the next step is to assess the different challenges it might come up against in practice; and to plan your response. Retailers who act now still have the opportunity to be “ready for Amazon”.
ABOUT THE AUTHOR
Jonathan Reeve writes and consults on retail strategy and last-mile fulfilment. His recent book, Retail's Last Mile, explores the disruption of traditional retail by online shopping. Jonathan is currently focused on helping business leaders respond to the arrival of Amazon. You can find out more about Jonathan and his services at jonathanreeve.com.au.
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