Amazon is launching in Australia: Here’s why it’s a big deal for everyone

Posted: 17 November 2017 5:33 pm News

amazon australia

The "Amazon Effect" is real and far-reaching.

There have been few companies whose launch in Australia has caused such a stir. The reaction to Amazon launching here has been mixed as have the predictions, but the fact is that the retail giant's launch is going to have a huge effect on all Australians.

Here's a breakdown of the "Amazon Effect" for shoppers, retailers and people that don't even shop online.

For shoppers: More for less

At the most basic level, Australians will have a whole new place to buy items. But it's a whole lot more than just a new place to shop – it will change how a lot of Australians shop.

Take Amazon Prime for example. For US$99 per year, American Amazon shoppers can have their purchases delivered in two days for free. For an extra US$7.99, shoppers get access to Prime Now and can have their purchases within the hour. Those looking to complete their grocery shopping online – that's right, groceries – can pay US$14.99 a month for Amazon Fresh.

While Amazon Prime will not be available in Australia at launch, the understanding is that the rollout will be relatively fast, so we may not have to wait too long for Prime.

Apart from taking the convenience of shopping online to a whole new level, Amazon Australia is also going to be very hard to beat price-wise. When rumours of Amazon's launch first started swirling, the company was reportedly taking price points for all products it was going to have on its platform. The plan was to drop those prices by 30%.

For retailers: The good and the bad

While it's difficult to guess just how much of an effect Amazon will have on Australian retail, Amazon's launch into other markets can give us an idea of what to expect. At the Amazon Sellers Summit, Amazon Australia's country manager, Rocco Braeuniger, said Australia's rollout would be similar to the rollout in Spain. This means it is unlikely the expansion will be as slow as it was in the UK.

Amazon launched in Spain five years ago with a number of product categories. Spanish customers currently have access to 175 million products and the Prime Now service is able to deliver orders within one hour to customers in Barcelona and Madrid.

  • The good: More opportunity and a lower entry barrier

To sign up to sell on Amazon's Marketplace, all you need is a business email and a business name. Obviously, you need something to sell, but selling products on Amazon is comparatively cheaper than setting up your own online store. While not available at launch, Amazon Australia will also be launching Fulfillment by Amazon (FBA), which will take care of all product storage and shipping for you for a fee.

Amazon's Marketplace also gives you access to a much larger customer base from the minute you start selling.

Retailers that do not list on Amazon's platform are not necessarily at a disadvantage as long as they keep up with the changing demands of Australian retailers. For example, when Prime is launched, Australians will have more online shopping options where they can get fast delivery. Retailers that still want to remain competitive online will need to keep up to compete.

  • The bad: Amazon will deliver cheaper products

Amazon has taken and maintained a huge market share in the US. It has expanded its platform into a range of categories, including groceries as well as web services through its Amazon Cloud Services. Its cloud business is so profitable that Amazon is able to cut prices in other key areas.

To put this in perspective, according to Geek Wire, Amazon would have posted a $286 million operating loss in 2016 rather than its $575 million operating profit if it wasn't for the hugely successful cloud services business. This allows Amazon to have a spider-like reach into various market segments, experiment with retail innovations and set very competitive prices.

These prices, coupled with its seamless end-to-end products experience, has led to a lot of customer loyalty and allowed Amazon to expand and innovate its services.

If we look at Amazon's offerings in the US, such as offering lockers at Whole Foods Markets to pick up online orders and offering one-hour delivery, it is almost announcing new offerings before customers realise they want it. The sheer speed of Amazon's innovation will mean some businesses won't just struggle to catch up, they'll struggle just to remain in the game.

The retail giant also sets prices strategically. Take, for example, its grocery pricing. It purchased US supermarket chain Whole Foods Market in June 2017, and by August, it announced it would start cutting prices. However, rather than cutting prices across all Whole Foods products, Amazon said prices would drop for a "selection of best-selling staples". This means shoppers will find the lowest prices for most items they're putting in their cart, which will give the impression it's a cheaper place to shop.

  • The bad: Amazon will deliver those products faster

Amazon launched its Prime service in Spain within a few months of entering the market in 2011. If we consider a similar rollout for Australia, customers in metropolitan areas will have that delivery time as the standard and retailers will need to be able to compete. This may mean either listing on Amazon's Marketplace or investing in their own business models to improve services.

The other major consideration for retailers is the product categories Amazon will be launching. While it's looking like it will be a mixture of clothing, toys, games, homewares and beauty, there's no reason why Amazon won't venture into other categories soon after launch. If your business sells products that Amazon is currently offering in any market, make sure you're ready for it to launch that category here. This means looking into price points, delivery methods and innovating your service to ensure you are going to remain competitive.

For people who don't shop online: There are still benefits!

Truth be told, I am one of these people. I find online shopping difficult and frustrating – but I still care about Amazon launching in Australia. So far, the full effects of Amazon's launch have only been guessed at. What has been agreed upon is that the launch will make it necessary for retailers to bring their A-game. This is true for product-price competitiveness as well as business innovation.

Many retailers selling products online also have bricks and mortar stores, so any improvements in their online stores will also benefit consumers shopping offline. Even if retailers aren't selling on Amazon Australia, they will be keeping an eye on what their competitors are doing and upping their own business offerings to compete. This means investing in their Point-of-Sale (POS) platforms, the shopping experience (in-store or offline) and the product itself. Namely, they will be doing everything they can to remain competitive, which benefits us as customers.

Not only that, but Amazon Australia may convert some in-store shoppers into online ones. With low prices and fast delivery being a likely part of its offerings, that may be enough to persuade people to try online shopping.

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