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Navigating Amazon: Making it work for you

Amazon has officially launched in Australia, which means it’s time for Kiwi retailers to think seriously about how they’re going to respond. Sarah Dunn looks at the threat and the opportunity it offers.

By Sarah Dunn | March 29, 2018 | News

What does Amazon Australia look like?

Amazon ended months if not years of fearful speculation from retailers in Australia and New Zealand when it officially launched in Australia on December 5, 2017. At first glance, however, Amazon.com.au is underwhelming: the product selection feels limited; prices are much the same as those on competing websites; and shipping to New Zealand seems to be an issue.

However, there’s no question that Amazon’s US$531 billion operation is competitive in the US, and it’s got the ability to recreate that offering Down Under.

Currently, Amazon Australia stocks products across around a limited selection of 20 categories, including: books; video games; consumer electronics; sports and outdoors; tools; toys; home improvement; beauty; clothing and accessories; shoes and Amazon devices such as the Kindle e-reader.

It will launch Amazon Music Unlimited in Australia and New Zealand from February 1, and will also start selling its Amazon Echo, Echo Dot, or Echo Plus at major New Zealand retailers including Noel Leeming and JB Hi-Fi from around the same time. The Amazon digital assistant Alexa, which works through the Echo devices, has been specifically tailored to the Kiwi market with extra knowledge such as New Zealand sports teams and some te reo Maori.

Australian customer orders are being fulfilled from Amazon’s new warehouse in Dandenong South. Amazon also has corporate offices in Sydney, Melbourne, Perth, Brisbane and Canberra, and employs more than 1,000 employees in Australia.

Delivery is a crucial part of Amazon’s worldwide appeal. Amazon Australia offers one-day delivery in Sydney, Melbourne, Brisbane, Adelaide and Canberra, with up to three days elsewhere under priority delivery. Free shipping for orders over $49 pushes the delivery time up to 10 business days outside main centres. Amazon is currently taking registrations for its paid-for priority membership programme Amazon Prime, and expects to roll it out in Australia in mid-2018.

It’s unclear whether Amazon Australia ships to New Zealand or not, and if so, what the costs are – most listed items on the site bear a note saying they do not ship to New Zealand, or are flagged as such on checkout. This includes those made by Kiwi companies like Trilogy and Kathmandu. Amazon did not respond to questions on the subject.

[Editor’s note: Following the publication of this feature in February, Amazon later confirmed via a third party that it does not currently ship to New Zealand. Sellers from New Zealand can ship into Australia, but not to local shoppers. It’s working on introducing shipping to New Zealand from the Australian site but has not indicated any timeline for the release of this feature.]

Amazon declined to answer NZ Retail’s questions about sales from New Zealand, its intentions towards the New Zealand market and its New Zealand-based retail partners, but country manager of Amazon Australia Rocco Braeuniger did say that first day orders on Amazon.com.au were higher than for any other launch day in Amazon history.

“From early in the day, we experienced visitor numbers that far exceeded our expectations,” says Braeuniger. “[December 5] was day one for our retail offering in Australia. We will be working hard today and in the long term to continue to enhance our offering and to provide customers with an ever-increasing selection of products at low prices.”

 “Over time, we will create thousands of new jobs and invest hundreds of millions of dollars in Australia,” says Braeuniger. “The result will be an ever-improving customer experience driven by the regular introduction of new products and services that we hope customers will love.”

As with Amazon’s other territories, retailers wanting to sell through Amazon Australia have two options: wholesaling their product to Amazon, or setting up a digital ‘store within a store’ on Amazon Marketplace.

Braeuniger says Australian retailers, including SMEs, are well-represented on the platform, with approximately 50 per cent of Amazon’s total units worldwide coming from Amazon Marketplace sellers. In 2016, Amazon says, more than 100,000 small businesses across the globe achieved sales of over US$100,000 through selling on Amazon.

In a press release sent through by Amazon, Adam Mills of KoalaSafe was quoted as enthusiastically endorsing the ecommerce giant’s opportunities for small Australian businesses. KoalaSafe sells wireless routers with inbuilt parental controls and has been part of Amazon Marketplace since 2015.

“Small businesses and retailers across the country should be excited about Amazon launching in Australia,” says Mills. “While it can be a challenge to ensure potential customers find your website, Amazon already has hundreds of millions of customers around the world searching for new products. The visibility and access Amazon provides is an enormous opportunity for all businesses.”

Can this be true for New Zealand retailers, too?

Putting their best foot forward (and then running really fast)

First Retail Group managing director Chris Wilkinson says there’s been an “absolutely incredible” series of significant upgrades rolled out by New Zealand retailers before, during and after Amazon.com.au’s launch. He sees the wave of projects as being linked to the launch, explaining that Kiwi retailers are racing to invest in improvements ahead of what’s likely to be significant competition.

“It’s given businesses a deadline that’s been necessary,” Wilkinson says. “Amazon’s been useful in calling action and calling time for some businesses.”

Wilkinson says it’s historically been common for retailers in New Zealand to procrastinate about investing in their online visibility and capability, giving online businesses from overseas such as Asos.com and Book Depository the opportunity to be front of mind when Kiwi shoppers search for products.

“People are having a play with it, but they’re not doing all they could be,” he says. “Overseas businesses do a much better job of promoting themselves and delivering online.”

Amazon’s launch in Australia has highlighted this situation and given retailers a greater sense of urgency that’s propelled them to invest in addressing it, Wilkinson says. He cites New Zealand menswear companies Hallenstein Brothers and Barkers as exemplars of online retailing in the Kiwi market: “But there are others that haven’t been.”

He says the picture is complicated by the fact that some of the recently-defunct apparel businesses have had good online presences, listing Kimberlys, Banks Shoes and Wild Pair as examples of those let down by their physical stores. The key is to balance online with bricks and mortar, Wilkinson says.

“You need to be thinking about right-sizing the store portfolio, looking at the new drivers that are influencing customer behaviour, such as convenience.”

Retailers should use the opportunity presented by Amazon’s arrival in Australia to get their houses in order and take their own online presence to “absolute best practice”, says Wilkinson. This means prioritising content; visibility; and having all features working correctly.

Wilkinson agrees that Amazon.com.au currently appears to be less of a game-changer than might be expected, but expects it will become part of New Zealand shoppers’ DNA over the next two years regardless.

“The fascinating thing is, it’s come out in Australia and it hasn’t moved anyone.”

He says Amazon Australia hasn’t yet had the depth and breadth of product that shoppers are likely to have been looking forward to, but suggests that what we’re seeing at this early stage may be a kind of super-sized beta test.

“They needed to discover where the pressure points would be,” Wilkinson says. “It’s very much a preliminary version before a proper launch.”

He believes New Zealand retailers should seek to understand Amazon and embrace it.

“It’s not something you can deny or beat, it just has to be handled strategically,” he says. “When things happen, they’ll happen rapidly.”

Which Kiwi retailers will do well on Amazon?

Amazon Australia is a great opportunity for vertical retailers which are already strong online across their own platforms, says Wilkinson. He offers Kathmandu as “the exemplar”, describing the outdoor apparel and equipment company as having a robust set-up which lets it take full advantage of what Amazon Marketplace has to offer.

“Kathmandu is a really good example of how to do it properly.”

For retailers selling products made by third parties, Wilkinson says, getting value out of a presence on Amazon poses more of a challenge.

“You’re in what’s essentially a commodity market and it’s really, really hard for you to get ahead because you don’t have the margins others would have in a global market.”

Wilkinson says rather than relying on a unique product, these retailers should leverage the only advantage they have available to them: localisation. Selling on Amazon Marketplace doesn’t necessarily need to be about price competition, says Wilkinson, who says there’s an opportunity for retailers in New Zealand to gain an edge over global competitors through their ability to deliver items faster and be available on the same timezone for inquiries.

Being able to create rich editorial content will also help retailers stand apart from others selling the same products, as will personalisation.

“Narratives are everything,” Wilkinson says. “The secret of good retail at the moment is that it’s all about aspiration – create something that people want to be a part of.”

For those with the inclination and the resources to list on Amazon Marketplace, it’s probably worth giving it a shot. Wilkinson says it’s crucial for New Zealand retailers to be across as many channels as their business possibly can be.

“We’ve got limited markets and many retailers are relying on people walking past their door every day… that’s risky for those with a smaller catchment.”

“They definitely need to be considering Amazon as one of those channels.”

Amazon’s ability to connect retailers with more than 300 million active customers worldwide means smaller boutique retailers could create a much stronger global market off the platform. Wilkinson says Kiwi retailers should look to the UK for guidance on how the New Zealand market may adapt to Amazon’s arrival, noting that small to medium UK chains not available outside the region have done well through Amazon.

“People have taken a liking to their products while visiting and it’s moved quite quickly thereafter.”

Learning from the best

Lewis Gyson, founder of retail automation start-up Ant HQ, says the stringency of Amazon’s seller metrics on Amazon Marketplace may push retailers to adopt a data-focused perspective, thereby improving their business practices.

Gyson started his career at Trade Me, and says it was there he first noted Amazon’s reputation for operational excellence. He says New Zealand retailers can learn a lot from its focus on data and innovation.

“It started out selling books but had the operational efficiency to scale up,” Gyson says. “Amazon has proven that you can, as a retail business, be extremely efficient, which is a function of how well your data is managed.”

Gyson says retailers shouldn’t immediately focus on competing with Amazon Australia but instead view it as “just another marketplace”.

He recommends retailers list their items across Amazon, Trade Me and their own ecommerce store, and monitor the performance of each platform against the others.

“When we talk about omnichannel, this is a real chance for retailers in New Zealand to test that out,” Gyson says. “List on everything.”

Gyson says automation is the key to hassle-free listing across several platforms. His company Ant HQ uses automation to integrate retailers’ back-end processs, unlocking efficiencies which make listing across different marketplace platforms easier.

When it comes to listing on Amazon Marketplace, Gyson says the mega-marketplace demands much the same kind of standards as other platforms from its retailers, but has its own metrics for measuring sellers’ performance.

Retailers seeking to list on Amazon should seek to understand the performance metrics that matter most to Amazon, Gyson says, as they may differ from those that retailers prioritise. He cites the ‘order defect rate’ (ODR) as the most important – it’s calculated by dividing the number of orders with ‘defects’ such as negative feedback by the total number of orders from the same time period.

“It’s essentially a measure of good customer experience,” says Gyson.

Retailers must have an ODR of less than one percent or risk losing their seller status.

Other metrics Amazon uses to track the performance of Marketplace sellers include: cancellation rate, which is the number of seller-fulfilled orders cancelled by the seller prior to shipping; late shipment rate, which is more or less what it sounds like; and on-time delivery score, which shows the percentage of seller-fulfilled packages received by buyers by the estimated delivery date.

Gyson says adapting to this new value system can be daunting, but it has the effect of encouraging retailers to adopt a productive new perspective.

“When you’re working with Amazon, start to think of yourself as a data-focused business.”

He echoes Wilkinson’s emphasis on the power of localisation and rich content to differentiate retailers from one another on large platforms, as well as the need for smaller Kiwi retailers to take their online presence more seriously.

“It is no longer acceptable to just slap something up online,” Gyson says. “You should be investing in [your web presence] like a tier-one retailer would.”

Big in Japan: Ecostore talks Amazon.co.jp

New Zealand plant-based cleaning and skincare product Ecostore has been selling into Amazon Japan via a distributor, Mash Holdings, since 2015. Mash is predominantly across high-end womenswear labels such as Snidel and Gelato Pique, but became interested in Ecostore as part of its portfolio of natural skincare products during 2014.

The two companies worked together to create an Amazon Marketplace store on Amazon’s Japanese website.

“It was always our intention to form a joint venture,” Ecostore chief executive Pablo Kraus says of the partnership.

Pablo Kraus

Through Mash’s distribution, Amazon became one of Ecostore’s first points of entry to Japan. A separate joint venture company, Ecostore Japan, has since been set up in May 2017.

Kraus says Mash saw Ecostore’s Amazon store as a way to test the market and get feedback on the products before launching them more widely into Japan. He’s comfortable with how it’s gone – “They’re great products, so we’ve had great feedback,” – but says operating at one remove from the customer means that negative feedback about things like stock shortages can sting.

Ecostore’s Amazon presence in Japan built credibility which allowed it to pick up supplier agreements with other retailers. Quite quickly, Kraus says, Mash was confident enough to invest in opening the first bricks and mortar Ecostore shop outside New Zealand in April 2016.

Augmenting ecommerce activity with a bricks and mortar presence is essential for a company like Ecostore, Kraus says. Ecostore has around 100 staff, with its head office in Auckland’s Parnell and a manufacturing plant in Pakuranga.

“For our consumer, we’ve always known it’s really important for them to pick [products] up, touch and feel and smell.”

Kraus refers to research saying consumers are “dying for pop-up stores”, and says it’s important for retailers to realise how important tangible experiences are to the modern shopper.

However, pop-ups and being stocked in bricks and mortar stores remain a key part of Ecostore’s strategy. Kraus says he expects to ultimately see both approaches grow.

“To be credible, you need to have both, and I don’t see bricks and mortar ever disappearing.”

“There’s always going to be that need to walk to the store and get some body wash.”

Amazon isn’t Ecostore’s only online presence in Asia. It’s also branched out into Chinese ecommerce marketplaces Tmall, Kaola, JD and VIP. These ventures are successful, says Kraus – on the November 11 Chinese ‘Singles’ Day’ shopping holiday, Ecostore earned over $1.1 million in 24 hours through Alibaba and Tmall.

Globally, ecommerce represents over 10 percent of Ecostore’s business.

“It is a really big focus of our business, and we don’t take it lightly,” Kraus says. “Amazon will be part of our future.”

“With the launch of Amazon in Australia, I can certainly see us wanting to be a part of that in the short to long term.”

Kraus doesn’t see Ecostore having any problems balancing retailing on Amazon with existing distribution agreements. Ecostore is, at least in part, a vertical retailer which manufactures and sells its products D2C as well as supplying other retailers.

“Given that we’re a consumer goods, FMCG product, we’re probably not going to have the same issues as, say, technology.”

Supermarkets are important to Ecostore’s sales, and Kraus acknowledges Amazon may pose a threat to Kiwi and Australian grocery brands with its Amazon Fresh and Wholefoods offerings. However, he says Amazon is just one competitor among many, citing My Food Bag as another challenger.

“For Ecostore, it’s very important for consumers to be able to walk down an aisle to pick up a package and read the back.”

Kraus says he intends to support both supermarkets and Amazon: “I certainly see it as a two-pronged approach.”

Besides additional sales, Kraus says the main side benefit Ecostore sees from selling through global marketplaces is access to enhanced data and analytics. When Ecostore sells through its own website, it gets access to every data point involved in the transaction, but on a platform like Amazon, it has the benefit of being sold alongside other brands. This means Ecostore has a clearer view of where it sits in the market, what products are bought alongside its own, and which products resonate with particular kinds of consumers.

For Kiwi retailers intending to launch their own Amazon presence, Kraus says a high level of confidence in their product is necessary: “Make sure if you’re selling through Amazon or any of these online retailers that you have a really high-quality product, because… if there’s a problem with it, you’ll find out about it and it could hurt your brand.”

“We’re on the world stage and we need to be delivering a product that’s as good or better than those of our competitors.”

Kraus won’t share the specifics of Ecostore’s growth, but says over the last five years, it’s seen double-digit growth each year. Its Chinese operations, which are wholly online, have grown in the triple digits for the last three years.

“We’ve come from being a humble New Zealand company with big global aspirations,” Kraus says. “New Zealand gives us the credibility in a lot of our export markets.”

Climb every mountain: Kathmandu on the Amazon experience

Kathmandu’s presence on Amazon is more focused on brand awareness than sales. The outdoor apparel and equipment company has been an Amazon Marketplace seller in the UK and Germany for two years now, and has just launched in Australia.

Paul Stern, general manager marketing, online and international, says Kathmandu’s partnership with Amazon comes back to awareness and searchability. Another global channel which gives prominence to the Kathmandu brand “has got to be a positive for us,” he says.

“It’s another channel, at this stage it’s very small, but it’s beneficial for brand awareness and searchablity, it’s not just about sales.”

There’s been no downsides from partnering with Amazon, he says, adding that Kathmandu was not concerned at the possibility of Amazon entering New Zealand.

“Amazon is like a Westfield shopping centre, once customers are there they experience all the stores and products on offer. Plus, it doesn’t require floor space so it’s easy to offer a wide range of products.”

Asked for any valuable lessons from the experience, Stern says it’s early days yet.

“There is no standout takeaway for us. It is really an opportunity to get our brand greater exposure and a broader customer audience.”

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