Retail report:
Global online retailer Amazon is coming to Australia, promising speedy shopping service and low prices. But can it deliver? Genevieve Gannon investigates.
shopping giant Amazon is coming to Australia
Picture a rainy suburban street. A woman arrives home from work on a winter afternoon, she and her children are soaked through. She dumps the kids’ wet clothes in the washing machine, but when she goes to add the detergent she finds it has run out. Her feet are aching and she can’t face a peak-hour run to the supermarket. “Alexa,” she addresses her voiceactivated personal assistant, “order more washing liquid.” She’s exhausted and the thought of cooking dinner makes her heart sink. “Alexa, order dinner from the Italian restaurant,” she says, then adds: “Oh, and Alexa, I want a bottle of red wine.”
The food and wine will arrive within an hour; the detergent the next day.
This not a scene from a sci-fi film, it is happening right now. In Seattle, London and parts of the US where Amazon has rolled out its latest suite of services, people are changing the way they shop. Since the launch of intelligent virtual assistant Alexa and its hands-free add-on Echo last year, one-click shopping has evolved to click-free shopping. The free-delivery membership program Amazon offers, Prime, means customers can have everything from sushi to bath salts delivered within the hour, just by asking.
Soon, it could be available in Australia. Amazon has confirmed it will launch a retail offering in Australia. For now, it remains tight-lipped on detail but has said it is looking for a consignment centre.
Its website carries a notice calling on Australian brands to sign up for Amazon Marketplace, which will deliver their products to buyers around the country.
Experts predict Amazon will be selling goods such as clothes and electronics in Australia within 12 months, and that its other innovations will quickly follow. While many people think of Amazon as a book retailer that expanded into general consumer goods, the company sees itself as a customer-focused tech innovator. It has invested in everything from artificial intelligence to drone technology – the latter being part of a project called Amazon Prime Air, which aims to develop parcel delivery within 30 minutes. Billionaire founder
Jeff Bezos has started his own aerospace research and development company.
Put simply, the local retail sector is set for a shake-up. Consumer and retail groups say Amazon’s arrival will lead to lower prices and better service. The dark side to this vision of the future is a digital monster that eats local retail, according to financial services group Morgan
Stanley. Its analysts have dubbed Amazon a “country killer”, and others are wary of its aggressive market growth strategies.
One commentator tells The Weekly retailers’ enthusiasm for the increased competition Amazon will bring could be a public brave face, hiding private fear.
“To be ‘Amazon-ed’ means to watch helplessly as the online upstart from
Seattle vacuums up the customers and profits of your traditional bricks and mortar business,” journalist Brad Stone wrote in his book about Amazon, The Everything Store.
But the Australian Retailers Association (ARA) says local companies have nothing to fear as long as they are prepared to provide a competitive alternative to Amazon. Either way, the net outcome for shoppers will be positive, ARA executive director Russell Zimmerman says.
TESTING, TESTING
Amazon already has a limited presence in Australia, offering Kindles, eBooks and audio books. Last year it launched streaming service Amazon Prime Video, a major clue that the company was preparing to enter Australia. KPMG Consumer Markets expert Trent Duvall expects it to introduce more initiatives bit by bit. “They will try a bunch of their different options and adapt those, and slowly over time roll out more and more, depending on what they see the Australian consumer wanting and using,” he says.
The company’s presence in Australia could eventually include all of the futuristic features described above and more – like the Amazon Go store being piloted in Seattle. In this check-out free real-world shop, customers using the Amazon Go app walk in, fill up their baskets, then walk out again. The app automatically keeps track of shopping items in a virtual cart, and after the customers leave the store, it charges their Amazon accounts and sends a receipt. (The app detects when items are removed or returned to the shelves, using the same sort of vision and sensor technology that makes self-driving cars possible.)
To start, we know Amazon Australia will be an online retail destination. There have been reports the company has been collecting local price points on goods and will set its own prices 30 per cent lower. Even if it’s are unable to deliver on this due to Australia’s small but widely dispersed population, experts say it won’t be a tough job to convince people to make the switch to the online marketplace. Australians already spend an estimated $1 billion in Amazon’s international stores and have an appetite for online shopping, being among eBay’s most devoted customers.
Amazon’s retail presence will pave the way for Amazon Prime, the membership
“Amazon is going to further disrupt the grocery sector.”
service that Morgan Stanley says has driven much of its success. When Amazon launched Prime in the US in 2005, founder Jeff Bezos described it as “all-you-can-eat” express shipping. Through Amazon Fresh, shoppers can order sausages, fruit and alcohol. Prime sells goods such as sauces and jam. At this stage, Amazon has only announced plans for one “fulfilment” centre in Australia, which means it probably won’t have the resources to implement Prime immediately.
“Since Amazon can’t leverage any existing fulfilment centres (like it can in Europe) the Prime offer will take longer to roll out,” a Morgan Stanley report says.
But Australians are fast adopters of technology and Amazon has evolved significantly since previous foreign-market launches, says George Freney, the Chief Executive Officer of retail tech start-up Booodl.
“When Australians have the opportunity to use new technology, they adopt it quicker than nearly every country in the world and Amazon is a very well-organised company now. They will probably launch faster in Australia than they have in other markets,” he says.
Freney says the scenario involving the mother running out of laundry detergent could be eliminated by a “set and forget” subscription-style function for household essentials. “In a few years you’ll see an ability to have automatic replenishment on some purchases which, I think, will shift a lot of that buying from supermarkets to Amazon in the medium term,” he says, and estimates this is two to five years away.
Coles, Woolworths and some independent grocers already offer an online shopping service that generally charge a fee per delivery.
In the meantime, the arrival of Amazon as a retailer will have a flow-on effect to local business. When RedGroup Retail, the owner of bookstores Borders and Angus & Robertson, collapsed in 2011, many pointed the finger at Amazon. But the ARA says the company simply failed to innovate. Jeff Bezos famously said, “Amazon isn’t happening to the book business. The future is happening to the book business.” Bookseller Dymocks, which has been fending off Amazon for years, says much of the pleasure of shopping comes from the personal experience. “All retailers, including Dymocks, will need to take their service and in-store experience to the next level to continue to attract customers to the physical retail environment,” says Dymocks spokesperson Sophie Higgins.
I NEVER GO TO SHOPS ANYMORE
As the spectre of Amazon casts a shadow over the Australian retail sector, local businesses have their work cut out. Shoppers in the US and the UK recently rated Amazon number one in consumer polls that surveyed more than 20,000 people.
New York author Glynis Astie signed up for Prime and Alexa as soon as they were made available and says she now does most of her shopping online.
“When I need to buy something, I always go to Amazon first,” Glynis tells The Weekly. Her family uses a function called “subscribe and save” for paper products, toiletries and some food items. “I also expect a lot from Amazon,” she says. “If I want something and they don’t have it, I’m surprised. I don’t want to go to another retailer.” She particularly likes its delivery service for Christmas shopping.
This should be a wake-up call for Australian businesses, says Choice spokesman Tom Godfrey says. “A number of local industries have been sitting back and not putting their customers first. They had better get an Amazon plan quickly.” He points to Aldi’s entry into the Australian market, which disrupted Woolworths’ and Coles’ dominance. “We had a duopoly, which was not great news,” he says. “Amazon is going to further disrupt the grocery sector.”
The ARA’s Zimmerman Russell says local retailers have learnt from Amazon’s performance overseas. “Those retailers concerned about Amazon coming to our shores are getting themselves prepared, either by ensuring they will be on the platform or by ensuring they have a very strong, aggressive website so they can compete,” he says.
Whether they choose to embrace Amazon or not, it seems the arrival of the online giant will be a win for Australian consumers.