How businesses are preparing for Amazon’s arrival
Change comes fast.
Australian retailers are scrambling to catch up with the market ahead of Amazon's arrival, but there are several obstacles still to be overcome. A finder survey has found Australia overall split in half on the retail giant's entry to the market, with 47% excited about its arrival but 53% more concerned.
A MYOB survey of small businesses has found retailers split nearly in half as well, with 57% looking forward to a reinvigorated marketplace but 43% expecting a drop in revenue.
Now further research from digital marketing agency DataSauce has found another near 50-50 split, which may be underlying the other divides. This split is between those who have a sense of what to expect and those who don't. According to the survey, around half of respondents (48%) know about Amazon Prime.
Why Prime matters
Prime might be the cornerstone of Amazon's dominating strategy. For an annual fee, of around $100 in the USA, shoppers get a package of services, like Amazon Prime Video, Kindle Unlimited, cloud photo storage, exclusive discounts and everything else today's connected customer needs.
The main feature, however, is probably free, fast and unlimited delivery of items purchased on Amazon, where shoppers can get everything from groceries to car parts. It's attracted over 60 million signups in the US.
"Amazon Prime in particular could be a game-changer in the Australian retail space," said Tzvi Balbin, former head of digital at Catch.com.au. "The Amazon Prime offering is more advanced than almost any of the services offered by retailers in Australia. This means that even those who have upped the ante with quicker delivery times may still struggle to compete with this service and match the level of investment."
Amazon Prime might be raising the bar. This means businesses are deciding whether they can jump high enough to reach it and whether doing so is worth the investment.
How to prepare for Amazon, according to the experts
"For many retailers, trying to compete with one or two day delivery and free shipping may prove too much for them to be able to compete." says Balbin. She advised retailers not to try and beat Amazon at their own game and look for points of difference instead.
"...to beat Amazon you need to focus on their weaknesses. Niche down, build and nurture a fanatical community, tell a story and leverage loyalty. After all, Amazon is a one size fits all."
"Don't fight enemies on their battlefield," Shopify Plus GM Loren Padelford agrees, quoting Sun Tzu's The Art of War. "If you think you can go and compete in Amazon's competitive advantage, it's not gonna work, right?"
The catch is that businesses probably can't avoid treading on Amazon's turf and will still need to make considerable investments in their online, offline and delivery networks.
"Consumers don't really care about online and offline. They just wanna buy what they want to buy, wherever, whenever and however they want to buy it. That creates its own complexity. In that, as a retailer now, if I want to engage my customers, I have to do it in a whole lot more channels than I ever had to before," Padelford explains.
This ability to engage customers anytime and anywhere is the so-called "omni-channel" network that retailers often hear about.
"You’ve also got to look at how omni-channel your business is, so the shopping experience is seamless," says Balbin. "A number of physical retail outlets are optimising their customer experience so it’s seamless offline and online. It’s not enough to have in-store pickup and claim to provide a true omni-channel experience."
Some of Australia's biggest names seem to have independently reached the same conclusion, with Coles and Amazon ratcheting up their own omni-channel networks to help customers get their groceries however, whenever and wherever they want.
Meanwhile loyalty and rewards cards, petrol discounts and other benefits have long been part of the grocery stores' customer engagement toolkit to help "leverage loyalty" and "build a fanatical community."
Small retailers might look forward to piggybacking off Amazon's omni-channel network to serve their customers (by selling goods through Amazon) and then building customer loyalty through strong communication, engagement and high-quality products.
A similar experience has already come to the restaurant industry. Facilities like UberEATS offer an omni-channel network, while good food builds the customer base. The main catch for retailers who plan on utilising Amazon's omni-channel network might be low prices and increased competition, taking a bite out of profit margins.
In a nutshell, the best way for small businesses to prepare for Amazon's arrival is to not panic. Big businesses, meanwhile, probably should have starting panicking in a more productive fashion years ago.