According to Citi analysts, we’re less than 60 days away from what will probably be the biggest major hit to Australian retail since the launch of eBay some 18 years ago.
Retail luminaries are already talking down the Amazon threat claiming it is ‘overblown’. This is wishful thinking indeed because when Amazon launches, it will not stop. There will be a continuous rollout of low price entrants into virtually every product category in Australia and the introduction of new categories not even here yet.
Retailers in other countries (like the US and UK) have, to their detriment, continually underestimated the Amazon impact, and the online giant will create the same dynamic here as overseas.
Amazon will launch with low prices and will stay low. Amazon will initially struggle with its other key levers, range and delivery, but don’t expect that to be a long struggle—it will build to its full model, and quickly.
And Amazon is here for the long haul. When some stock analyst writes that Amazon will take just 0.2 per cent of the Australian retail market, this is just for the first half-year of operations. Remember, the US market initially wrote off Amazon as ‘just a book seller’ and didn’t respond until it was too late. Don’t make the same mistake big names like Sears have; don’t wait to respond…act.
Amazon: just a book seller?
Understand this: nearly 3.8 million Australians have already shopped with Amazon, according to Roy Morgan research. Shoppers are already very familiar with the Amazon model and will no doubt be very keen to purchase from the Australian-based arm.
If you are a bricks-and-mortar retailer and you haven’t got your ‘Amazon defence plan’ up and operating, you still have time…just.
The main reasons shoppers use store-based retail are: instant gratification and the human experience.
These are incredibly powerful competitive benefits. The question retailers must ask is are they delivering on these benefits in this changed retail marketplace?
The bricks-and-mortar advantage
Instant gratification is the instant delivery of the product the shopper wants. This can only be achieved through bricks-and-mortar retail as there is no wait time. The shopper enters the store, experiences the product (see, touch, taste, and even smell) and takes it home.
The human experience is a little more ethereal; it is about the actual shopping experience. Is there a quality customer service offering? Does the store invite customers to purchase in unique and fun ways? Is the shopper motivated to return for more?
Instant gratification and the human experience talk to the shopping experience that we humans love. Shopping is more than consumerism. It is a way to spend the afternoon with friends or even to temporarily alter the way we perceive ourselves by changing our physical appearance. This is the emotional payoff of store-based shopping.
Retailers must recognise that bricks-and-mortar retail is a changing market because of Amazon and other online retailers. A changed marketplace means that consumer behaviours have altered.
For example, people have become comfortable with buying familiar products online because they know what to expect and so there is little risk. People are not comfortable buying unfamiliar products online as they cannot ‘see, touch and taste’. They don’t know what to expect and their ‘risk’ of disappointment is high.
Store-based retail has powerful competitive benefits, and every retailer needs to question if they are delivering on the experience in their store.
Focusing on and delivering the unique competitive benefits of bricks-and-mortar retail must be the centrepiece of any ‘Amazon defence plan’. Amazon is less than 60 days away; the clock is ticking. Bricks-and-mortar retailers—get moving.
Michael Stafford has 20 years’ experience helping multinational companies grow. He now works with small to medium sized businesses to help them expand at 6Seed.
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