NZ gets ringside seat for Aussie showdown
Bank of New Zealand came out last week with its always useful monthly summary of retail online sales in New Zealand. Overall online retail spend continued to grow locally, up 10 per cent year-onyear. Sales at domestic sites were up 12 per cent, while online sales via overseas merchants were up 7 per cent. By contrast, offline line sales grew only 3 per cent year-on-year. Simply put, online sales are outstripping high street sales by 200 per cent to 300 per cent, with online grocery, electronics and computer-related sales fuelling most of the growth. While spending at local online stores has been growing faster than at overseas sites, that doesn’t mean local retailers aren’t twitchy as all get-out. There’s a general feeling that we’ve been fortunately forgotten by the global giants, as they go headto-head in the bigger markets. The biggest e-commerce battlefront globally is the squaring off of Amazon and Alibaba, with Amazon having the higher revenue of US$178 billon (NZ$266.3 billion) compared with Alibaba’s US$3b, while Alibaba has higher gross merchandise value of US$702b compared with $225b for Amazon. Meanwhile, the oldest e-commerce giant of them all – eBay – has become increasingly less relevant to today’s consumers. This year its share price has dropped more than 25 per cent as it struggles to remain relevant and suffers an increasingly messy divorce from its payment offspring PayPal. Two years ago eBay chief executive Devin Wenig claimed that rather than beating Amazon at its own game – selling everything and delivering it yesterday – his plan was to make eBay the ‘‘antiAmazon’’, excelling in areas where Amazon lags. However, this year he seemed to have had a change of heart, deciding to go for the Amazonian jugular, and choosing Australia as the test-bed for a well-resourced battle. Two months ago eBay launched eBay Plus at a massively discounted price with a full-noise advertising campaign. eBay Plus is basically eBay’s version of Amazon Prime, a paid subscription service that offers a range of bankable benefits for a fixed fee. In eBay’s case, this includes free delivery, free returns, exclusive deals and discounts, plus special deals and products. In the United States Amazon Prime costs US$99 a year, which is pretty good value by the time you’ve made a few purchases. eBay decided to launch Plus in Australia with a gobsmacking introductory price of just A$29 (NZ$32) and throw in double Fly Buys points and a dedicated customer support team. What’s more, they timed the launch in mid-June, just prior to the Amazon launch of Prime in Australia. Lastly, they threw in a
It’s an opportunity for our local e-commerce operations to look and learn from the Australian experience.
neat little shin-kick as well, an Australia-only ban on sellers using Amazon’s fulfilment service. All of which seems to have contributed to Amazon launching Prime in Australia at half the price of the US rate – namely, A$59 a year and a special introductory offer of just A$4.99 a month – with two-day delivery to 90 per cent of Australian addresses. While they haven’t confirmed it, the word on the street is that this pricing was hastily rehashed in the period between the eBay launch and the Amazon one in an effort to stay relevant. Aussie consumers are the big winners here, enjoying the spoils of this global e-commerce wrestle. Australian retailers less so, as the giants facilitate a race to the bottom in pricing. With six times our population, it makes sense for both companies to have a good lash at Australia before looking at this side of the ditch. But come they will, so it’s an opportunity for our local e-commerce operations to look and learn from the Australian experience. The clear take-out is the importance of a paid subscription service to strip out the costs of shipping and increase trust through better customer support and returns. Some companies have smelt the coffee and gone that way already. Local hero Mighty Ape has been running its Primate service for a while. For $48 a year, Mighty Ape provides unlimited free delivery, free upgrades and unlimited shipments. Add this to their sameday delivery in Auckland and the monkey crew are looking pretty sorted. Others, like Torpedo7, have less potent offers. Their Over and Under club gives you free delivery on items over $150, and interestfree finance and Fly Buys. Others like Trade Me and Fishpond have yet to introduce subscription services. Meanwhile, based on recent job advertisements, The Warehouse is gearing up to launch a major new business-to-consumer online marketplace later this year. Although there has been no formal announcement, ‘‘The Market’’ is likely to be a standalone operation but with the ability to tap into goods and pricing through subsidiary companies such as Noel Leeming, Torpedo7, 1 Day and Number One Fitness. The question on everyone’s lips remains: when will Amazon start targeting New Zealand out of their new Australian fulfilment centre, and who will be they be partnering with? To be clear, I don’t know the answer to this. But I can’t help but notice that you can hardly get through the door of your nearest Warehouse Stationery store before you are blasted with a static display of Amazon Echo voiceresponsive assistants for $69. And normally you’d be barking mad to offer a customer interface device to a major competitor. So maybe the global giants haven’t forgotten us at all – they’re just getting aligned with some of the locals? Mike ‘‘MOD’’ O’Donnell is a professional director, consultant and writer. His Twitter handle is @modsta and he may be a little paranoid. Disclosure of interest – MOD holds shares in The Warehouse, Amazon and eBay.