Everybody wants to talk about Amazon’s arrival into Australia. The online mega-retailer confirmed its launch into Australia in April, and has been preparing to send its operation live ever since. The million-dollar question is, will it cross the Tasman? And how will it affect Kiwi retailers?
On the second day of New Zealand Fashion Week, retailers gathered at the GridAkl coworking space in Auckland’s Wynyard Quarter to discuss the threat posed to Kiwi apparel companies by Amazon at SaaS company Cin7’s retail breakfast ‘Amazon down under: Interpreting opportunity, managing risk.’
“Amazon is probably the most talked-about subject everyone’s seen in many, many years,” says keynote speaker Chris Wilkinson of First Retail Group. “It’s a game-changer.”
Quoting an unnamed client from a large Australian firm, Wilkinson told the crowd that retail has changed more in the past decade than the last century. Shoppers are now empowered and purposeful, and they’re no longer limited by geography to local retailers.
It was once considered unlikely that consumers would buy beds, thousand-dollar diamond jewellery and other bulky or expensive items online, says Wilkinson, but that’s just what is happening now.
“All those things that we, as retailers three or four years ago, thought would never happen are happening, and they’re happening at an accelerated rate.”
New Zealand’s online sales have an attrition rate of 41 percent, one of the highest rates in the developed world.
“Our overseas retailers are really getting a jump on us,” says Wilkinson.
Part of the reason Kiwi retailers are failing to capture customers’ attention online is that they’re not taking online seriously enough. According to Deloitte’s ‘The Digital Divide’ report, digital influence inspires and drives decisions in more than 70 percent of all transactions, up from less than 20 percent in 2012.
“Retailers need to be working smarter, they need to be hungrier,” Wilkinson says. “We need to be working harder to be part of the consumer’s consideration set and that doesn’t necessarily mean price.”
In 2016, Wesfarmers group managing director Richard Goyder said Amazon would "eat all our breakfasts, lunches and dinners. Wilkinson shared the quote to indicate what lies ahead for New Zealand retail, saying it will have a “huge impact” on large retailers selling commodity products.
In the US, Amazon has had a serious effect on the diversity of the retail industry. Sixty-five million Americans are members of Amazon’s paid Amazon Prime scheme – that’s 44 percent of households. Founder Jeff Bezos has been quoted as saying he wants to make it “irresponsible” to not be a member.
“Amazon’s here to stay,” says Wilkinson. “They’re going to become a key part of peoples’ lives.
“They’re looking at how they can work themselves into New Zealanders’ DNA.”
To ride the wave of Amazon’s arrival, Wilkinson says retailers must “get amongst” Amazon’s marketplace, which means starting to adapt and align their businesses right now. Most important is “re-prioritising ecommerce”, he says, but changing stores so the experience goes beyond the transactional to inspire discovery and delight will also be key to survival.
Cin7 founder and chief architect Danny Ing says efficient supply chains which enable fast order fulfillment will help Kiwi retailers be competitive against Amazon. He says Bezos didn’t find success with products, but by mastering the supply chain.
Automation and integration will become even more important as retailers establish their Amazon sales channel, Ing says.
Wilkinson’s recommendations for priority actions are:
- Get an Amazon marketplace account set up so that you can understand and master its system.
- Interpret where your competitive advantage may lie. For some New Zealand retailers, Amazon marketplace will open up their markets much, much wider.
- Enhance your digital content and capability so your offer is differentiated and gains priority.
- Find your fit with a local or category-specific marketplace, like the new Hamilton Central website.
- Leverage collective strength by joining your local business association or similar.
- Focus on the vitals. Create and demonstrate differentiation with unique products and high-quality customer service.