Why Aussie retailers need to play the Amazon long game
After so much speculation prior to launch, Amazon’s arrival in Australia late last year left many business owners wondering what the fuss was all about. Initial market reactions ranged from tepid to, well, lukewarm.
Some Aussie retailers saw Amazon’s entry as an all-but-certain instant market domination and registered as sellers, while some decided to wait and see how things unfolded.
Just over six months on, and based on an initially unenthusiastic consumer response, some retailers are wondering if they should cut their losses, while others continue to sit on the fence.
I can’t say I understand either mentality…because it makes no business sense.
The long game
The thing is, Amazon in Australia is in a test-and-learn phase. It’s essentially a start-up. The company is renowned for its patience and CEO Jeff Bezos for playing the long game.
He’ll gladly sacrifice short-term profit to bet big on the future, a philosophy he outlined in 1997 in his first investor letter titled, It’s all about the long term. By his own admission, he never focuses on the present, but keeps a steady eye two or three years into the future.
And where has that thinking gotten him? Well, Amazon was named the world’s most valuable brand earlier this year, beating both Apple and Google to the punch. It’s also on track to becoming the first company ever to enjoy a market cap of $1 trillion, a figure it will reach by 2022.
If there was ever a case for taking the long-term view, that’s it. Of course, most businesses don’t have the luxury of ignoring the present. Bezos can afford to because he’s got people to do it for him. But staying future-focused means not (over)reacting to every market movement as it happens.
Early consumer criticism of Amazon’s arrival focused on the lack of low prices, limited product range and the absence of the full Amazon Prime service, a subscription that gives customers free order delivery, coupled with an extensive entertainment offering and other discounts.
Customers combated the reduced range by shopping on Amazon’s international websites, enjoying the full breadth of products on offer.
While it may not have met with initial market expectations, Amazon is quietly sticking to its plan of concerted progression, announcing a new Sydney fulfilment centre in early May and electing not to confirm or deny persistent rumours around an imminent local Amazon Prime launch.
Delight the customer
With such an indifferent initial reaction, retailers could be forgiven for thinking the whole thing was much ado about nothing — something with negligible impact on the local retail landscape.
That thinking ignores the company’s commitment to its ‘flywheel’ strategy, whereby everything it does is intended to deliver a superior customer experience.
A more rewarding experience draws more shoppers, which attracts more sellers, which lowers costs (and prices) and expands product selection, which draws more shoppers, which attracts more sellers, which lower costs…get the picture?
You can see this strategy unfolding locally in real time. There were less than 5,000 Australian sellers at launch, but that number will exceed 50,000 by year end.
The company introduced its Fulfilment by Amazon service locally in February, allowing sellers to warehouse goods and have orders picked, packed and shipped directly, a move designed to improve the customer experience.
Levelling the field
After years of intense lobbying by local retailers, the federal government has introduced changes to GST collection laws, effective 1 July.
Online sellers are now required to collect GST from international sales shipped to Australia. This was previously only applicable for transactions over AU$1,000.
Amazon has just announced it will block Australian consumers from purchasing on overseas sites, redirecting to them Amazon.com.au, but local shoppers can still access a limited range of international products via a global store on Amazon.com.au. It houses 4 million items versus the 500 million on Amazon.com
That’s good news for Australian retailers and more reason not to cut ties or stay on the fence when it comes to marketplaces.
Long-term opportunity abounds for retailers, who can set up quickly and still enjoy the first-movers’ advantage, accumulating sales history and garnering positive reviews that directly influence search rankings.
There is no doubt Amazon is here to stay. It’s playing the long game and Australian retailers should too.
Ryan Murtagh is founder and CEO of retail management platform Neto. Initially a retailer himself, Ryan understood the industry pain points and sought to provide a platform that could be applied to businesses of all sizes and change the way merchants sell online.