Why 2018 will be “the year of experimentation” for Aussie retailers
Dan Ross – With Amazon’s recent launch in Australia, local online retailers have a right to be concerned. 43 per cent of all online retail sales went through Amazon last year in the US, and prior to even launching in Australia, Amazon’s sales amounted to around $1 billion through overseas shipments.
Amazon has wasted no time in making its mark since its launch in Australia. The online giant has already secured 2.11 hectares of land in Sydney’s south-west and told businesses participating in its marketplace to get their pricing and stock in order. Many commentators have expressed their concern as to what this will mean for Aussie retailers, with entrepreneur Dick Smith concerned that Amazon’s launch will would do “incredible damage”.
Despite this, the change has the potential to whip the retail sector in Australia into shape and improve the quality of service across the board. This is because retailers who fail to match Amazon will quickly realise how difficult it is to stay afloat. When fully ramped up, Amazon can deliver nearly any item on the same day it is purchased, and returns are as simple as a tap in their app and leaving the box on the porch. This is the level that Aussie retailers need to operate at, and do so quickly.
Amazon is able to provide its customers with exactly what they need due to its ability to experiment. It has a deeply ingrained culture of experimentation, whereby it has decentralised teams who don’t rely on the HiPPO (the highest paid person’s opinion). This allows Amazon to be nimble, quick on its feet and innovate at speed. If you want to compete with Amazon at Amazon speed, you must do the same.
Experimenting with purpose also means adopting the right technology. Sophisticated digital experimentation technology like Optimizely democratises the power of Amazon’s agile “test and learn” ethos. This means that any Australian business, regardless of their size, can compete with Amazon at their own game – rapid iteration and innovation.
Businesses are already taking notice and viewing digital experimentation as central to their standard operating procedure. It is no longer just a marketing practice, it’s become the way that they approach decision-making, customer experience, and product innovation. It’s also used to make decisions that have huge financial reward. In fact, the Harvard Business Review has said that “rigourous online experiments should be standard operating procedure” and “the returns you reap—in cost savings, new revenue, and improved user experience—can be huge.”
Take online bookstore, Booktopia, for example. Through A/B testing, Booktopia discovered that placing trust icons in their website header led to a 2% increase in conversion rates. When you look at Bootkopia’s revenue of $100 million – those two icons are worth $2 million to their business.
Like Amazon, Booktopia also has the humility to admit when they are wrong about something and listen to the data when they run experiments. For example, their marketing team hypothesised that one of their digital experiences was discouraging customers from completing purchases. Booktopia admitted that perhaps they didn’t know what was causing the drop off so they ran an experiment to test and learn. After running the experiment they found that their “gut” feeling was actually wrong and thus prevented themselves from lost customers, wasted time, and revenue.
Pushing the limits
In 2018 and in the future, I expect to see more companies pushing the limits of what’s possible within their organisation. Rather than basic website A/B testing as so many organisations have relied upon to date, I see more and more companies utilising data from around their firm to improve on their customer experience and internal operations. In essence, saying “we have all this data, why aren’t we using it more broadly?”
I’m increasingly seeing with the work I do at Optimizely a new generation of executives looking to democratise decision-making and innovation within their companies. This will inherently break through silos and force them to be more customer-centric: something that could be the difference between success and failure in the age of Amazon.
The year of experimentation
Amazon’s arrival in Australia is an opportunity for all Australian businesses to up the ante when it comes to the service they provide. If there is one thing that Amazon is a master of, it’s the ability to rapidly innovate in service of their customers
With 2018 on the horizon, Australian businesses should see this as an opportunity to start afresh and assess how they can compete in what is likely to be a pivotal year for their business. With Amazon going hell for leather to rapidly gain market share, those who put experimentation at the heart of their business will be the ones who come out on top.
Dan Ross is the managing director at Optimizely ANZ.