The talk of Amazon coming to Australian shores has never been more rife than in 2017, as this is the year it’s speculated to happen. Amazon’s entrance could be a double-edged sword according to Nathan Huppatz and Ben Hare, who discuss what online retailers can do to prepare.
I sat down with Nathan Huppatz, co-founder of Costumes.com.au, and Ben Hare, director and chief operating officer of online retailer TinyMe, to see what their thinking around Amazon’s imminent arrival in Australia was, and how online retailers can put their best foot forward regardless.
1. Do you think Amazon will arrive in Australia this year, and why?
“Yes I think they will, but it may only be in the form of grocery and not merchandise yet. We will see, but my sources indicate they are looking for space as well as staff.
Getting a distribution centre (or multiple centres) up and running before Christmas 2017 would be a big ask, as they would have to not only fit it out (it is likely they might lease space first, and perhaps build distribution centres later) but also stock with product, train staff, get processes running etc. And as they are only hiring now, they have a long way to go. I suspect that if they do open warehouses to start selling merchandise, that it may not be until next year that we see this.”
“There has been speculation around Amazon’s imminent arrival in Australia for years now, but 2017 may well be the year. As they work down their list of priorities, no doubt Australia must be progressively getting closer.”
2. If Amazon does arrive in Australia in 2017, what do you think it could mean for local retailers?
“Local retailers will be put under a little more pressure, over time. Amazon is a huge brand and already well known by Australians, many of whom already shop on the American, Canadian and UK sites. Although they may not have a big impact initially, I believe they will really force a lot of retailers to re-think their offerings. Australia has a relatively low e-commerce penetration rate compared to more mature markets like the US, Europe and UK, where Amazon has taken hold.”
“Amazon’s arrival is likely to be a double-edged sword for local retailers. Certainly, they are a major competitive threat and are likely to impact margins. But on the flip side, Amazon’s arrival would likely accelerate penetration of online shopping in Australia and provide another channel for online retailers. On balance though, the impact would be mostly negative.”
3. What are the weakest links in Australia’s pipeline to innovation success, and why do you think it’s important they need to be aggressively tackled?
“I think competition creates innovation, so from that perspective Amazon’s entrance into the local market should certainly prompt some innovation. Innovation success also needs support from industry and regulation. We are seeing more activity in the funding space for startups in technology, e-commerce and other areas, and a stronger focus from government over the past five years to help support startups and innovation too. Previously, this lack of support was a weak link in our pipeline, but I personally believe we have a better ecosystem now for innovation than we have ever had.”
“I don’t think there’s much stopping Australians from innovating to be globally competitive. We just need to get out there and give it a crack. Historically, I think we’ve been held back by having a smaller domestic market by global standards. But increasingly, Australian retailers are able to compete in the global market. The more we can reduce trade barriers to assist that, the better. Competition has always been the greatest stimulus to innovation.”
4. How can Australia minimise Amazon disrupting our local e-commerce landscape? What do you think online retailers can do to prepare?
“Great question! We can be innovative in our product offering. We can support our customers with more than just price. We can offer product, range and service, along with website/in-store experiences that Amazon can’t touch. I am afraid though, that if you are retailer of a commoditised product, already battling for market share in a competitive space, that the arrival of Amazon won’t help. My e-commerce compatriots in the USA have shown me that Amazon is not necessarily their friend. They are a marketing channel for many businesses and can provide a good level of extra marketplaces sales, but they can also be a fierce competitor!”
“The most important thing is to be clear on is what differentiates your business in the customer’s eyes, and continually invest in that. It’s all about execution. E-commerce is now a global industry. To be competitive we need to relentlessly improve in order to build a globally competitive, differentiated offering for customers. For us at Tinyme, that’s about innovating through mass customisation, to create unique products that people will value.”
“Online retailers in Australia need to realise that amazon will often sell the same product you do, in competition with you. They may let you sell on their platform, find out what works well and is profitable, then buy direct, or manufacture themselves and beat you on price. However if you manufacture your own product, then Amazon may be a good new channel to sell into.”