Amazon is here: six survival tips for retailers

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Amazon is here: six survival tips for retailers

Find out which retail sectors will be affected by Amazon's entry into the broader Australian market – and how to coexist with the giant.

UPDATED: With Amazon launching its expanded online market in Australia this week, we've updated this survival guide for local retailers.

Back in June, Amazon had confirmed it plans to push into the Australian retail market in a big way – a move that seemed destined to have a significant impact on many local retailers.

Credit Suisse tipped the retail giant would take at least five percent of several retail categories within five years.

Gartner retail supply chain analyst Thomas O'Connor indicated the scale of the threat: in the US, around 55% of online shoppers start at Amazon, and the company accounts for about one-third of online sales in that country.

However, more than 90 percent of US retail sales occur in-store, and only 10 percent of US consumers expect to visit stores less frequently.

Are you in the firing line?

Hardtofind founder and CEO Erica Stewart pointed out that in reality, Amazon was already in Australia, selling the Kindle and books locally, while plenty of Australians have made purchases from amazon.com.

Around $1 billion worth of products a year are thought to be sold into Australia by Amazon.

Those selling a curated range of products with limited availability are probably relatively safe, but retailers of fast-moving consumer goods are in the firing line, she suggested.

Citi Research estimated that Amazon could take 44 percent of Australian electronics sales, 19 percent of physical and electronic media, 11 percent of sport and outdoor products, and 10 percent of clothing.

If you're in any of those segments, that’s something to worry about. However, that doesn’t mean you can’t do something about it.

Here are some tips that may help you deal with the retail giant’s Australian launch.

1. Get all the little things right

Stewart’s top tip is that you need to be the best business you can, otherwise you face trouble with or without Amazon.

In particular, she advocates exemplary service, reliable delivery, a tightly curated product range, and developing a brand that resonates with customers.

For example, customer engagement can be fostered in several ways, including blogging, adopting the right tone of voice in all communications, providing a good in-store experience if you have a physical presence, and employing “those little added touches” such as including a small surprise with the order.

2. Focus on logistics and delivery

Innovations in logistics are available to small retailers as well as the giants. While small players might not be experimenting with delivery via drones or autonomous vehicles, some carriers are doing it for them.

Australia Post is doing its best, said Stewart, but reliability is very important and new entrants are offering one to three-hour delivery in metro areas, and small etailers need to keep abreast of this market.

Amazon's ability to provide delivery in two days or less – often with no delivery charge – is a core driver of its business, according to O'Connor.

The use of click-and-collect arrangements can provide a differentiator, especially where a retailer has a bricks and mortar presence, as it helps customers get what they want, when they want it. And given the less than stellar delivery services in Australia, the option of collecting goods from a location easily reached from home or workplace can be attractive to customers.

He also suggests giving consideration to making local deliveries an in-house function rather than relying on Australia Post and other carriers. That could be extended to operating as a delivery co-op with other businesses, or handled by arranging individual deliveries via Uber-style services.

But whatever else they do, retailers should “make the delivery-to-return process as frictionless as possible,” O'Connor advised.

3. Identity your point of difference

Retailers need to think carefully about their points of difference, according to O'Connor. If businesses can't match Amazon's speed of delivery, they need to provide customers with a good reason to buy from them. That could be lower prices (though that could be hard to achieve), close relationships (as mentioned by Stewart), having a customer-friendly returns policy, or any of several other factors.

It could mean repositioning. For example, Catch (formerly Catch of the Day) has – in advance of Amazon's push into Australia – repositioned itself as an online marketplace, attracting well-known brands including Lorna Jane.

According to a recent Microsoft white paper, “Microsoft believes Australian retailers should differentiate their offerings in a way that pure-play competitors [such as Amazon] cannot replicate. For many, this will mean taking the best of Amazon – the frictionless online experience – and supporting it with unique innovative, interactive and tactile experiences for customers in store.”

4. Focus on data

“Customer intimacy” can be developed “by pursuing a multichannel strategy in which retailers create a seamless physical and online presence,” according to the Microsoft paper. “Retailers can track a customer’s journey with the brand as they move from attraction to engagement and transaction. With each swipe of a mobile app, chatbot conversation, social media post or webpage click, information can be accumulated about a customer’s unique ‘DNA’.”

However, the information flow should be a two-way process. Curation is “absolutely critical”, O'Connor said, but another challenge for smaller etailers will be to provide visibility of which products are in stock and where those stocks are located. This is “extremely important, and will become table stakes in the not too distant future” as it builds the trust of customers.

5. Consider Amazon as a selling platform

It could be a mistake to view Amazon just as a competitor, because in North America retailers can sell items through Amazon’s platform. If the company offers a similar facility in Australia – and Amazon says it will – retailers will need to carefully evaluate whether that would be right for their businesses, Stewart warned. For example, would such a relationship align with the existing brand image?

Nevertheless, a large number of the online retailers intend to sell on Amazon and, in fact, as many other marketplaces as possible, according to a recent survey.

6. Remain positive

Customers buy from different brands for a variety of reasons. “Consumers ultimately want choice – it’s not all about price,” said Stewart, as can be seen from the success of small creative producers. “I'm very optimistic” about the future of small retailers, she added. 

“We've all got to find a way to coexist [with Amazon], and I think we can,” she said, providing retailers keep their focus on what makes their individual businesses special and why their customers love them.

“It is going to be difficult, [but] there is opportunity for success,” agreed O'Connor. And as we have explained elsewhere, Amazon could be the small retailer's friend.

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