Amazon is set to land here – and change the face of local retail.
THE PENDING ARRIVAL OF THE AMERICAN BEHEMOTH IS THE BIGGEST DISRUPTION TO THE AUSTRALIAN RETAIL SECTOR IN DECADES. LITTLE WONDER THE LARGER, LOCAL OUT FITS ARE CIRCLING THE WAGON S.
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. amazon.com.au