Australian businesses warm up to Amazon’s arrival

Andrew Munro 7 November 2017 NEWS

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There are enough canaries in the coalmine.

Amazon appears to be growing on Australian retailers, with a recent InsideRetail survey finding SMEs warming up to the idea of selling on Amazon, but larger businesses to be much less enthusiastic about its arrival.

62% of surveyed micro businesses, 56% of small businesses and 53% of medium sized businesses said they saw Amazon's arrival as an opportunity to grow. Big businesses were the outlier, with only 33% expecting Amazon to be helpful for them.

Back in March 2017, an MYOB survey showed chillier and less certain attitudes from SMEs and it looks like smaller sellers have warmed up since then.

This broadly mirrors attitudes among consumers. Back in June, a Finder survey found only 47% of buyers looking forward to Amazon's arrival. But a few months later this had shifted and in September a Commonwealth Retail Insights survey found that almost three-quarters of buyers were perfectly happy to shop on Amazon.

Overall it looks like SMEs and buyers are warming up to the idea, but larger businesses are getting increasingly concerned.

Cautionary tales

Larger businesses have probably seen enough to be justifiably concerned. The impact of Amazon's arrival isn't the same across all product types, and some of the earlier-hit areas, such as electronics and fashion, are looking like canaries in the coalmine.

For example, electronics and fashion retailers in particular, might be providing a glimpse of the future.

  • They're getting squeezed by overseas competition that undercuts prices and ships to Australia.
  • They're encountering overseas competitors opening physical stores in Australia to complement an online presence.
  • They're increasingly competing with Amazon's own product lines.

It's probably not a coincidence that many large Australian retailers in the highly-exposed fashion and electronics areas have recently faced dropping share prices and lost revenue. As Amazon expands its product range to appliances, groceries and more, other once-established large businesses might also run into problems.

In short, large retailers have gotten an eyeful of Amazon's impact and don't like what they see. The upshot is that they still have time to adjust and learn from others' mistakes.

For example, Woolworths and Coles are pushing strongly ahead with their online offerings and taking particular care to accentuate their points of difference in the form of grocery pickup options and customer service touches, as well as deliveries.

Success stories

While large business attitudes to Amazon are cooling in the face of cautionary tales, SMEs might be warming up on a diet of success stories and experts advising them to embrace the opportunities rather than fear Amazon's arrival.

Some of the clearest success stories might be those of Australian entrepreneurs that went international specifically to take advantage of Amazon but are still having trouble fulfilling orders down under.

For example, Swanwick Sleep. The company sells blue-light blocking glasses primarily through Amazon Marketplace in the US, UK, Europe and Canada.

"In America and Europe you can send your products to Amazon’s warehouses and they will store them and then ship it to the customers when it’s sold," founder Tristan Swanwick said. "Up until now that hasn’t been available in Australia and it’s always been really frustrating that we can cater for customers in Los Angeles or New York City better than someone in Brisbane or Sydney."

"Amazon provides a platform to build a business from scratch with little more than a great idea. We went from zero to $1.5 million in less than two years and there’s no reason why other entrepreneurial Aussies can’t do the same thing."

There's also a wealth of evidence pointing to the importance of a robust online presence, and Amazon might provide a uniquely cost-effective way for smaller businesses to get their foot in the door online.

Questions remain

However, despite SMEs' growing optimism, questions remain about what exactly Amazon Australia will look like.

"It won’t be like it is in the US, where 64 million consumers have Amazon Prime. They’re only putting a facility in Melbourne to start with," explains Mark McGinley, chief executive of CouriersPlease.

Sellers who already work with Amazon in multiple countries can offer clues about how things might be different in Australia.

A big market swings both ways

Ben Muller, founder of Dock & Bay, has sold on Amazon Marketplace in both the USA and UK, and found that a larger market means a bigger audience, but also more competition.

"From our experience the key difference is the sheer size and scale of the US market and the intense competition that comes with that." he said. "We launched Dock & Bay in the UK Amazon marketplace, but nothing could have prepared us for how big the demand was in the US."

Australia is one of the smallest markets that Amazon has launched in, so it's not yet clear how the competition and customer numbers will balance out.

There might be relatively little competition, but it might be disproportionate to the number of customers. Getting a strong start, making full use of the tools available and picking up a bigger piece of the pie might be key.

Take full advantage of the tools available

"There is definitely a knack [to] learning to use Amazon’s platform to your fullest advantage." Muller explained. "Amazon is essentially the worlds biggest product search engine... optimising your product listings on Amazon is important - it’s the public face of your brand and you need to find ways to get found".

Sellers have a lot of "free range to boost their brand and product." Muller said, "from paid search advertising to image and video features."

Making full use of these tools will likely be an important key to success, especially for a new brand that's yet to be "discovered." Some of them, such as paid advertising through Amazon, may come at a cost but might still be well worth it.

It's worth keeping an open mind while exploring the Amazon Marketplace toolkit, and considering how each might help communicate the strengths of one's brand to customers.

Winning products

"The best products on Amazon have a little bit of something different about them which makes them stand out - an edge on the rest of the products out there and an ability to communicate that edge effectively to would-be customers." Muller said. "There is significant opportunity for new brands and small retailers to enter a level playing field with more established brands and shine."

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