A less-fearsome Amazon
Juanita Neville-Te Rito, founder of Retail X and retail strategy director, notes that it’s likely New Zealand will not immediately experience the power of Amazon’s full-service offer, which is where much of its edge lies.
“By rolling out Amazon Prime Alexa, Echo, Echo-Look or Amazon Fresh, the company infiltrates the home through their subscription offer and extensive services with everything from priority shipping, collect pick-up sites through to exclusive content access,” she says.
Neville-Te Rito says New Zealand’s competitive landscape isn’t simple, and its geographic diversity paired with the infrastructure required to service our relatively small population of 4.7 million will mean Aotearoa is “not necessarily attractive to conquer”.
She predicts the trans-Tasman markets of New Zealand and Australia will be “hard yakka” for Amazon and in the short term, Kiwi retailers have more to fear from the likes of Kogan and its relaunch of Dick Smith.
However, Neville-Te Rito notes Amazon has already had a strong presence in both markets via sales shipped from offshore or through its Amazon Web Services business for years, and warns retailers not to be complacent.
“What this entrant brings to our, at times, pathetic and complacent retail ecosystem, is a shake-up,” she says. “Retail leaders will need to revitalise, curate strong offers and customer experiences. Retail is a deeply social activity. Good retailers connect with the customer they serve and are a vibrant contributor to the ecosystem they operate in.”
The way out is through
Hamish Conway, director of Amazon ecommerce advisors Sell Global, speaks of hosting a 2017 talk in New Zealand, at which he asked the audience of approximately 100 Kiwis to raise their hand if they’d ever shopped at Amazon. Nearly everyone did.
Conway says the Kiwi retailers that are likely to be most vulnerable to Amazon are:
Briscoe Group. Homewares and sports equipment are popular categories on Amazon. The products tend not to be commodities but are “of that ilk”.
The Warehouse Group, in particular the Red Sheds. “They tend to play the price game, and service is, in my experience, not amazing.”
Silvermoon. Retailers selling small, third-party-branded products which are easy to ship, at lower price points than fine jewellery, are at risk of being undercut by Amazon.
Rather than passively allowing themselves to be undercut, Conway says the way forward is to engage with Amazon directly, and do it as fast and as well as possible.
Sell Global doesn’t recommend wholesaling products to Amazon, but Conway says manufacturers, retailers and distributors should be ready to set up as a marketplace-style shopfront as soon as Amazon Australia launches, if they haven’t done so already.
"Get in first and get on page one, because that's where 86 percent of the sales occur. Getting in early will be invaluable for protecting your brand and pricing, and staking your claim on how the brand is presented on Amazon. If you don't do this, then someone else will."
The relationship between a retailer with a digital shopfront on Amazon’s marketplace and Amazon itself is much the same as any other global marketplace, Conway says. The retailer sets up a digital ‘store within a store’ on Amazon’s platform and broadly retains control of what takes place there.
“As far as the other operators with ecommerce, Amazon is the choice of platform for us.”
It’s Conway’s pick over any other marketplace provider in the Western world.
“You want to have Amazon and your own ecommerce site,” he says. “Amazon will help drive traffic to your ecommerce site.”
Having a shopfront on Amazon allows retailers to get a slice of its sky-high conversion rate, Conway says. He cites a typical conversion rate of 2-5 percent for independent ecommerce sites, whereas with Amazon, “if you’re doing under 10 percent, you’re disappointed.”
Conversion rates of over 40 percent on Amazon aren’t unheard of, Conway says.
According to Conway, the three core reasons enabling Amazon to achieve this elevated conversion rate are: one-click buying; free two-day shipping; and the ability for shoppers to buy with confidence knowing that if their product isn’t right, they can return it for a refund.