Should Aussie retailers be scared Amazon is coming?

Amazon has now confirmed it is coming to Australia, with a banner already on its Aussie website promoting the Amazon Marketplace to local retailers and brands.

With a reported signing of a lease for a warehouse at the Goodman Group's $50 million Oakdale Industrial Estate, on Old Wallgrove Road, at Sydney's Eastern Creek, the move is sparking speculation as to the scale of disruption facing local retailers.

Amazon has already made a significant mark on both US and UK buying behavior and consumer choice, selling everything from groceries to electronics, beauty products, clothing to children’s toys. But to date the Australian market has been limited mainly to audio, books and kindle products. Now, the prospect of Amazon’s offerings shaking up the Australian retail landscape is opening up debate as to what’s really in store for the local marketplace.

Head of CX research at Fifth Quadrant, Dr Steve Nuttall, said he things the launch of Amazon due this year is a bit long overdue, especially as it is now so well established in the US and UK.

“Coming out here I think it will straighten things out in the marketplace for retailers,” he said. “And we should see this as an opportunity. It's a new day for brands and retailers and the Amazon retail marketplace is going to be a good thing for some smaller retailers down the track.

“I don’t know to what extent is will affect some of the more established Australian brands that have such as sense of customer loyalty, but I don’t think it's all bad news.”

According to Nuttall, Aussie retailers are already getting ready to heavily invest in order to partner with Amazon or fight off their rivals once the commerce giant hits our shores.

“But this is a good thing for the market as it drives innovation,” he added. “Maybe the established bricks and mortar retailers without a significant online presence or no online presence will struggle. But I think we’ve seen Amazon operate in UK and Europe and we can expect to see the same thing.”

Chairman of CROSSMARK and the founder of The Road to Retail, Kevin Moore, agreed. He also stressed competition drives innovation and it’s time Australian retailers stop being complacent.

“The US and European markets have had to face and deal with online innovations and cross border shopping for decades,” he told CMO. “In Australia we haven’t had that competitive environment so we’re not match fit. There is still a level of complacency within the Australian retail sector, supplier and retailer, traditional and pure online, over the entry of Amazon into this market. Richard Goyder, CEO of Wesfarmers is a lone senior voice when he says: Amazon will eat our breakfast, lunch and dinner.”

When plotting growth and shopper experience, it’s evident that retailers such as Aldi, Costco and Amazon will continue to take share from traditional Australian retailers, Moore claimed

“When Amazon arrives with a full in-market team, it is likely to achieve dominant sales in the sectors it chooses to focus on,” he said. “And Amazon will achieve more than 20 per cent sector share across the whole of market in less than three years.

“As an online retailer, Amazon will account for 30 per cent of all online sales, but even more staggering, it will account for more than 100 per cent of all online sales growth every year for those three years. That means Amazon will grow new online sales and take online sales from already established online retailers.

And the sales growth cycle will just keep getting shorter, he added.

"That’s the true point of difference around “digital disruption” when a pure online play enters a traditional retail marketplace,” he explained. “Everything just happens faster. From the shoppers’ perspective, a wide range of cheaper, high quality products, delivered quickly to your door, is never a bad thing to have.

"Their systems are proven, are located up in the cloud, and they need less of everything tangible to grow. And like Aldi and Zara, Amazon understands the power of ‘retail own brands.’ When Amazon launches an own brand into a sector, it does so to win in that sector."

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