Business

Is Australia Ready For Amazon?

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When Amazon comes to Australia, how will businesses cope?

Late 2016, Amazon revealed their plans to have a major presence in every Australian state by the end of 2017, as reported by the AFR.

Amazon is looking to send products directly from Australian distribution centres, which means faster delivery times and less annoyance for Australian customers previously confronted with products that didn’t ship to their area. There will be physical stores in more regional areas to provide faster delivery to those once not as easily accessible by distribution channels.

Australian consumers will have the benefit of Amazon Prime, which asks an annual fee of $100 for fast and often free shipping, access to Amazon Prime’s original content and other licensed TV shows and movies, and access to over a thousand books, magazines, and Kindle Singles. Amazon’s Prime Now also promises to deliver products in less than two hours, a delivery rate matched only by fast food delivery services.

The Australian move will also include the introduction of Amazon Fresh, a online grocery service that offers same-day delivery service. They promise everything you’d find at a normal supermarket or grocery store, from fresh produce to health and beauty items.

But what does this mean for Australian retailers?

Well, unless they fight back with exclusive offerings, this might be the beginning of the end for local businesses.

Craig Woolford, Citi’s Managing Director and Head of Consumer Research, spoke about the impact Amazon has had on the economies of other countries, saying, ‘Amazon has disrupted a number of markets and in each case overseas we’ve seen retailer profitability and sales shift to Amazon’. The service already has plenty of loyal customers in Australia, despite the problems associated with shipping from overseas distribution centres, so a move to become more local might just be the thing Amazon needs to truly cater for all their Australian customers, but the question still remains about how Australia will respond.

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Artisan food brands might prosper from the move, as UK’s Amazon Fresh already offers delivery services incorporating local businesses – so if there’s a particular Australian-made brand of dairy or produce you prefer, there’s the chance that they will be included in the Amazon takeover. However, retailers like Woolworths and Coles could find themselves in direct competition with Amazon Fresh, since they also offer online delivery services.

And when considering Amazon’s prime real estate – the sale of electronics, books, and numerous other categories – the main Australian players might be in trouble. Predictions for Australian outlets that will suffer include JB Hi-Fi, Harvey Norman, and Myer, according to the Sydney Morning Herald. It’s a wakeup call to major retailers to diversify their consumer strategies and products, or risk being overtaken by Amazon.

The Amazon move will most likely stretch from mid-2017 to early 2018, so if Australian retailers are planning on making changes to compete, they will need to act quickly.

To make matters even more complicated, Amazon has plans to establish a drone delivery system. With it’s first successful drone delivery in the UK, the technological wave of change over the company’s operations is in full-throttle. The convenience and sheer novelty of the service might coerce customers into switching over to an Amazon-based lifestyle, especially armed with the knowledge that electrical drones are much better for the environment than the petrol-powered delivery cars of the present.

Australian businesses will be under even more pressure to innovate their strategy in a rapidly changing environment in an attempt to stop themselves being buried under the onslaught of Amazon.

 

Featured image from Wall Street Journal

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