With Amazon’s speculated expansion into Australia in September this year, the US warns that online retail will be disrupted and bricks and mortar chains adversely affected.
A top US retail analyst says that when Amazon comes to Australia, we can expect some second tier shopping centres to become “white elephants,” as commercial property falls, according to The Financial Review.
In addition to this, a recent Citi report says the likely arrival of Amazon in Australia could see the earning potential of some of our top traders, including Myer and JB Hi-Fi, drop by 23 percent.
A good reason for this major disruption is that Australia has huge profit margins. Amazon plans to come in and take advantage of that. And if retailers are planning to compete on price alone, it’s unlikely they will survive. They need to think along the lines of offering consumers more than “just cheap.”
So, what can companies do now to prepare for Amazon’s arrival later?
Myer has already begun reacting by offering its consumers a more personalised shopping experience. Retailers need to offer its consumers more than just price slashing. They need to compete online and give consumers more, because let’s face it, Australians do shop a lot.
Gerry Harvey of Harvey Norman recently came out saying that furniture retail won’t be affected too much if Amazon comes to Australia, because people don’t shop for furniture that much online, but rather it’s the electrical goods that are really going to take a thrashing. However, I beg to differ. More than half of my peers shop for furniture online. I moved house 12 months ago and 80 percent of all my furniture was purchased online.
The good news of the possible arrival of Amazon in Australia is pricing, well for the consumer anyhow, and in the short term. The bad news is, if the commercial property marketing is falling, then it’s going to spread across other sectors, including investments and super funds that invest in these areas, so there will be a ripple effect and huge ramifications along the line.
With overseas online retailers now having to implement the GST for purchases under $1,000, consumers will now find that cross-border online shopping may not be as cheap as they thought.
However, getting back to our huge profit margins in Australia, this is what Amazon looks to take advantage of if they come here. Our retail market is estimated to be worth $221 billion. Even if Amazon takes a third of this, that’s going to have a huge impact.
So the bottom line: retailers are going to have to adapt to survive the Amazon disruption if they come to our shores in September, step up their game in online retail, pricing, and offer consumers more than “just cheap”.