Ama­zon is set to land here – and change the face of lo­cal re­tail.


GQ (Australia) - - CONTENTS -

If you think life has been al­tered in the past decade by gi­ant Amer­i­can brands such as Ap­ple, Face­book and Net­flix, then to quote the hir­sute and du­bi­ous front­man of ’70s rock­ers Bachman Turner Over­drive – “you ain’t seen noth­ing yet”. A few years from now you’ll barely be able to imag­ine what life was like be­fore Ama­zon ar­rived – aim­ing not sim­ply to dis­rupt the lo­cal land­scape but to “de­stroy the re­tail en­vi­ron­ment in Aus­tralia”. While that sounds slightly alarm­ing (and fi­nan­cial ex­perts ad­vise against in­vest­ing in lo­cal re­tail­ers, most of which are woe­fully un­der­pre­pared for what’s com­ing), from a per­sonal, pur­chas­ing point of view, it’s go­ing to bring a sud­den wealth of ex­cit­ing and in­no­va­tive mea­sures that’ll have most ques­tion­ing how we ever man­aged be­fore – think de­liv­ery drones buzzing at the door with or­ders made by ver­bal­is­ing what you want to an Ama­zon per­sonal as­sis­tant (her name’s Alexa, get used to it), to gen­uinely con­ve­nient Ama­zon Go su­per­mar­kets with no check­outs or queues. Most im­por­tantly, though, there’s a good chance you might end up pay­ing less for ev­ery­thing from elec­tri­cal goods to hot din­ners – just as Amer­i­cans al­ready do. Ama­zon’s ex­pected to be up and run­ning in Aus­tralia by the end of this year (and fully es­tab­lished in 2018). What will we get? Its Prime Now pro­gram pro­vides same-day ship­ping to mem­bers on a stag­ger­ing range of prod­ucts in­clud­ing hot food; Ama­zon Fresh is an on­line gro­cery de­liv­ery ser­vice where you can also choose to click first and pick up later; and Ama­zon Go is a high-tech su­per­mar­ket where ev­ery item picked up is added to an Ama­zon ac­count, and you just walk straight out. Ama­zon Aus­tralia, which al­ready runs its old-school­sound­ing Ama­zon Web Ser­vice, fi­nally con­firmed its im­pend­ing in­va­sion (af­ter orig­i­nally telling GQ, “we don’t com­ment on spec­u­la­tion”) in mid-april. The of­fi­cial an­nounce­ment was brief, though it did con­firm it would in­tro­duce a full range of ser­vices. It fol­lows the mega-com­pany’s moves in busily leas­ing large lumps of real es­tate in both Syd­ney and Mel­bourne, as well as ad­ver­tis­ing for jobs with the line: “You say you want a bunch of ba­nanas, a dozen bagels from your lo­cal bak­ery, and a cof­fee maker de­liv­ered to your doorstep be­tween 8am and 9am to­mor­row? We say, no prob­lem.” Justin Braitling, chief in­vest­ment of­fi­cer at Water­mark Funds Man­age­ment, says he was given a brief­ing by the per­son re­spon­si­ble for rolling out the Aus­tralian strat­egy, which will ini­tially con­sist of col­lect­ing price points, and then set­ting prices 30 per cent lower. Braitling says he was told Ama­zon sees enor­mous po­ten­tial be­cause lo­cal re­tail prices re­main so high – and de­scribes its lo­cal motto as, ‘your mar­gin is our op­por­tu­nity’. “We spoke to the guy rolling out Ama­zon’s busi­ness here in Aus­tralia,” con­tin­ues Braitling, “and in his words, ‘We are go­ing to de­stroy the re­tail en­vi­ron­ment in Aus­tralia.’” Water­mark’s po­si­tion is that most Aus­tralian in­vestors are un­aware of ‘the Ama­zon ef­fect’ and Braitling points out that US re­tail stocks are priced rel­a­tive to the per­ceived risks to their busi­ness from Ama­zon. While busi­nesses have ev­ery rea­son to worry, Ama­zon’s ‘ap­peal­ing’ in­no­va­tions and lower prices should be a boon for the pub­lic, ac­cord­ing to con­sumer-ad­vo­cacy body, CHOICE. “Ama­zon seeks to dom­i­nate mar­kets,” says CHOICE’S Tom God­frey. “Its in­flu­ence on the way we buy books is an il­lus­tra­tion of this. When you con­sider this gi­ant dis­rup­tor is now push­ing into gro­ceries and stream­ing, it’s clear lo­cal busi­nesses have a se­ri­ous fight on their hands. “If your in­dus­try is fail­ing to in­no­vate and act in con­sumers’ best in­ter­ests, you’re in for a shock.”

But if it’s a fight Ama­zon wants, then Gerry Har­vey will be ready and wait­ing. Har­vey Nor­man’s ex­ec­u­tive chair­man prob­a­bly has the most to lose and has al­ready be­come the loud voice of the Aus­tralian anti-ama­zon move­ment. “Ama­zon have one goal, and that’s to send as many re­tail­ers as they can broke, so that they can take over the mar­ket. And when that hap­pens, nat­u­rally they’ll in­crease their prices,” Har­vey tells GQ. “The prob­lem with that is it’s preda­tory pric­ing. You re­duce the price to send the other guy broke, and that’s hap­pened across Amer­ica. “If they set up here and start sell­ing some­thing for what it cost them, or less, and it sends other re­tail­ers out of busi­ness, well that’s preda­tory pric­ing, and it’s against the law. “We’ll be con­stantly on to them. They had an easy run in Amer­ica. No-one re­ally fought them. But the day they land here, and the day they do their first ad, we’ll be out at­tack­ing them in full force.” Har­vey best start drum­ming up some sup­port. Re­search con­ducted by Com­mon­wealth Bank showed just how un­pre­pared lo­cal busi­nesses are, with al­most half of the 505 Aus­tralian re­tail­ers sur­veyed say­ing they were “un­fazed” about the im­pend­ing com­pe­ti­tion, and only 14 per cent say­ing they have a busi­ness plan to com­bat Ama­zon. The on­line gi­ant, es­tab­lished by Jeff Be­zos, now takes 43 per cent of on­line re­tail sales in the US. By 2027, the com­pany is ex­pected to own 10 per cent of all re­tail sales in the Amer­i­can mar­ket. Mac­quarie Bank al­ready pre­dicted the jug­ger­naut could be mak­ing $14.5bn in on­line sales in Aus­tralia by 2025. Fi­nan­cial ex­pert and Sky News pun­dit Peter Switzer de­scribes Ama­zon as “a busi­ness killer”, which is al­most an un­stop­pable force due to its sheer size. “If any­one thinks I’m ex­ces­sively dra­matic talk­ing about this on­line leviathan in this way, just think about [de­funct book chain] Bor­ders. How could such a busi­ness dis­ap­pear?” he asks. “So, who’s next on the death row cre­ated by Ama­zon, which can ig­nore im­por­tant cor­po­rate im­per­a­tives, such as prof­its, to give it­self time to mur­der its ri­vals?” Part of Ama­zon’s abil­ity to crush com­pe­ti­tion is its economies of scale. With its hun­dreds of ful­fil­ment cen­tres cir­cling the globe, its abil­ity to move goods is un­matched. And then there’s its em­brace of tech. In 2012, the com­pany bought ro­bot­ics out­fit Kiva for more than $1bn, to help it au­to­mate the mun­dane and hu­man-in­ten­sive part of ful­fill­ing on­line or­ders, 24 hours a day. It now has 15,000 ro­bots zoom­ing around those same ful­fill­ment cen­tres (con­tain­ing as many as 26 mil­lion items, and five mil­lion dif­fer­ent prod­ucts) each car­ry­ing shelves sev­eral feet high and able to haul up to 350kg. The com­pany also runs its own fleets of semi-trail­ers and vans, and has its own cargo planes. Though its al­ways look­ing to do away with ex­pen­sive, whiney, health­care­de­mand­ing hu­mans – hence the new drones and the in­vest­ment in self-driv­ing trucks. Dave Clark, Ama­zon’s vice pres­i­dent of world­wide op­er­a­tions says the rise in pro­duc­tiv­ity the ro­bots bring will al­low Ama­zon fur­ther growth – and that growth will mean it has to hire more peo­ple: “As you’re get­ting ef­fi­cient in one thing, as it ma­tures, you’re in­vest­ing in some­thing new. I see that cy­cle con­tin­u­ing for a long time.” The next big area for Ama­zon to in­fil­trate is your house, where its very own, home-grown voice as­sis­tant, Alexa, aims to ape the hu­man­like com­puter from Star Trek. Cap­tain Kirk’s ver­sion of Siri was the in­spi­ra­tion for Steve Rabuchin, who heads up Alexa’s voice ser­vices and skills at Ama­zon. “What would it be like if we could cre­ate a voice as­sis­tant out of the cloud that you could just talk to, that could con­trol things around you, that could do things for you, that could get you in­for­ma­tion?” Rabuchin ex­plained. Alexa will be present in houses, in ho­tel rooms, and cars (Ford and Volk­swa­gen have al­ready shown off in-dash sys­tems). She boasts 10,000 “skills” and count­ing (she had just 135 skills at launch in 2015) and can do any­thing from or­der­ing Ama­zon de­liv­er­ies to set­ting an oven to cook chicken. The fu­ture is com­ing, and, one way or an­other, the fu­ture is Ama­zon. ama­

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