The Australian retail industry is getting jumpy about the arrival of Amazon next year but it doesn’t have to be bad news – especially for SMBs – explains John Debrincat.
When Amazon confirmed earlier this year that it is going to roll out operations in Australia in 2018 the retail industry went into a spin. Big store directors, such as Kmart’s Ian Bailey and Gerry Harvey of Harvey Norman, vowed to pull out the boxing gloves and stay ahead on price and customer service. But while larger retailers may need to put up a fight or go down trying, the best strategy for smaller retailers might well be ‘If you can’t beat them, join them,’ says John Debrincat, Managing Director of eCorner. We ask him to outline some strategies for eCommerce retailers.
What do you think Amazon in Australia will mean for our retailers?
The retail market goes through large scale evolutions every few years – from the arrival of department stores to shopping malls to the web and eCommerce – and the entry of Amazon into the Australian market is just another one of these cycles. It will present threats and opportunities for retailers depending on their ability to respond and maximise value from the changing landscape.
The entry of Amazon has the potential to level the playing field. Small retailers will have the opportunity to compete side-by-side with bigger players for the same customers and gain similar exposure for their products.
The cost of entry for smaller retailers could also be lower, as larger retailers may have a harder time adapting to the new market. They will need to review and update their business processes and technologies to integrate the new channel.
The opportunities available will largely depend on which portions of the Amazon ecosystem are opened up on the Australian market. It seems likely that Amazon ‘Marketplaces’ and ‘Fulfilment’ will be coming, which will be accessible to large and small Australian merchants.
You’ve recommended people start selling on Amazon but a lot of eCommerce businesses are boutiques that sell different brands rather than their own. Can the boutiques join Amazon too or are they in direct competition with it?
Amazon Marketplaces present many opportunities aside from just another channel to sell product. They potentially harness large volumes of shoppers, making them a great place to build brand awareness, test new product ranges or dispose of excess stock.
However, merchants selling products from other brands will need to be cognisant of their licensing agreements with the manufacturer to ensure they aren’t breaching their agreements by listing products on marketplaces like Amazon.
If you have a more exclusive brand do you think it waters down its exclusivity by selling on Amazon?
Not necessarily. Merchants should be more wary of devaluing their brand by trying to compete on price, particularly if their products are niche or boutique. However, Amazon provides a great opportunity to have these specialty products displayed side-by-side with the mainstream brands and be visible to a much larger potential customer base.
Amazon is already home for large and exclusive brands like Nike, New Balance, Levi, Casio and many more.
Can you think of five ways SMB eCommerce businesses can prepare for the arrival of Amazon?
- Have a strategy going in, but be flexible. Identify what you would like to achieve from selling on Amazon and the goals you will assess to ensure it’s working for your business, but be ready to adjust or abandon that strategy if it’s not working for you, or if other opportunities present themselves.
- Consider your product range and identify products that could be a good starting point for trialling Amazon Marketplaces for your business. Look for high margin products where the fees won’t too greatly impact your business, products with unique value propositions or a good competitive advantage over other similar products likely to be listed on the Marketplace.
- Ensure your systems and processes are ready. Consider what you will need to be able to manage the new channel with increased orders, new shipping/fulfilment methods and additional online systems.
- Consider your marketing budget. You will need to pay fees to list on Amazon, and it will also be worthwhile to do some target marketing within Amazon Marketplace, like sponsor products, to increase your products’ reach and build some brand recognition.
- Keep an eye on your competitors. When Amazon launches, there’ll be a stampede of retailers clambering to get involved. Be mindful of what your competitors are up to and make sure they don’t get the jump on you.