The Tyro Blog

12 December 2017 - 4 min read


What does E-commerce and Amazon mean for retailers?

E-commerce is not a new phenomenon. Ebay and other platforms to purchase goods online have been around for over 15 years in Australia.

We are a country that loves our smartphones and internet, with a high penetration of usage compared to other countries. So while we have some geographical distribution challenges, it is no surprise that Amazon entering the Australian market is designed to cause disruption.

The likes of Gerry Harvey have had more than a ten year window to get prepared for the future of online sales, but have they done enough to be ready?

The likely losers in the Amazon invasion

You only need to look at what has happened overseas, to see that Amazon has the potential to make a huge impact on Aussie retailers. How? By capturing a significant portion of market share.

Scott Kilmartin, producer of the documentary David vs Amazon, says big retailers will bear the brunt of Amazon’s move into the Australian market. The likes of Myer, David Jones and Kmart are going to find it really tough.

Morgan Stanley calculations back this up. Suggesting department stores and the other big digital disruptor from the US, eBay, will be the most affected.

US department stores profits have halved in the past decade. So Australian department stores that operate with “must trade” clauses in their long-term leases, could be sitting ducks with their high cost operations.

You have a little bit of time to prepare

While the exact details around what products Amazon will launch with in Australia remains a mystery, it is likely with our large geographical area that it will take a few years for Amazon to really dominate the market here.

We can perhaps be best compared to Canada, where Amazon has certainly gained a foothold but they have failed to destroy their rivals.

If you are an Australian retailer, there is still time to capitalise on the opportunity.

Investment Bank UBS suggests that the launch of Amazon would accelerate the uptake of online shopping in Australia. Meaning smaller retailers with a solid e-commerce offering stand to be the big winners.

Smaller retailers could see great benefits

Smaller retailers and independent brands can see some benefits. You can expand from just selling on your own website to also selling on the Amazon site.

This opens up a whole new market of potential customers for your brand. Rather than trying to beat them at their game, there can be considerable upside to engaging with Amazon.

Already the Amazon US site attracts a unique audience of 4.6 million Australian shoppers in October. With our own local site this number is sure to grow.

Joining the Amazon marketplace is something that independent brands should consider.

A case study of a Perth based business that sells hot sauce currently on the US Amazon site, is now making $US 4000- $6000 a day. When Coles and Woolworths refused to stock the product she turned to the e-commerce giant and now sits as the top-selling hot sauce on the website.

A boutique clothing store, Summer Lane, has signed up already as an Amazon Marketplace seller. Jessie Goh, who runs the business, is excited to be able to access Amazon’s huge reach. It presents opportunities for independent brands to take advantage of Amazon’s technology, fulfilment and marketing know how.

People can be reluctant to buy from a small independent online store due to a lack of trust on the retailer’s own website. But backed by the Amazon brand it may encourage more people to purchase online.

An exciting disruption for consumers

Whilst the big retailers are right to be concerned, for consumers Amazon’s arrival is an exciting disruption. Over the next decade the way Australians buy products will look very different.

Consumers are demanding a seamless experience and Amazon does this extremely well.

While pain points remain with other retailers, making sure your offering is optimised for digital sales will become more and more important.

Amazon is not likely to decimate the retail sector overnight, but it does show us we need to be more prepared than ever to focus on improving the customer journey. The 19th century model of sales is broken and Australian retailers need to step up and embrace what consumers now want.

Are you ready for the new world of ecommerce to hit our shores?