Surviving Amazon: What’s a retailer to do?

Published on the 06/07/2018 | Written by Heather Wright

Amazon Prime Australia

Locals must ‘lead or leave’ the market, analyst says...

Retailers across Australia and New Zealand are being urged to open up their IT wallets in order to compete as Amazon increases its assault on the region with the launch of Amazon Prime in Australia.

Jaideep Thyagarajan, IDC Australia senior market analyst, said the launch of Prime – Amazon’s subscription service offering benefits including free two-day delivery, streaming video and music and Prime Reading – further turns up the heat on incumbent retailers to either ‘lead or leave’ the market.

Retailers with poor digital orientation and inferior omnichannel capabilities are likely to see further loss of market share and ensuing liquidity crises, he added.

“Retailers need to be ready … with competitive pricing, multichannel convenience and, most importantly, differentiation.”

While the impact of Amazon’s launch has been muted, with the company opting for a low profile launch in December 2017, Thyagarajan said it has ‘risen up slowly but surely’.

He told iStart many retailers are working towards capitalising on the tangible customer experiences which can only be offered in-store, with investments in analytics and cloud becoming areas of focus as retailers seek to generate insights about customers and their workforce, which eventually will be transformed into profits.

“Some retailers are also coming up with new models to delight customers and keep their employees better engaged,” Thyagarajan said.

He highlighted Woolworths as an example of a company strategically building up its defences against Amazon.

“It started with Woolworths establishing pick-up points for online grocery orders in 970 of its stores,” he said.

Of all the offerings available to retailers, Thyagarajan said multichannel convenience will be the most critical. “Retailers need to open up their IT wallets and start carefully building on expanding their channels beyond the store.”

Thyagarajan said AI too, will have an impact, with the technology finally starting to deliver real-life benefits to early adopting local businesses, after years of extravagant promises and frustrating disappointments.

“There are cases now where local retailers on the digital frontier have begun to rely on AI-powered robots to run their warehouses and even to automatically order stock when inventory runs low.”

A key part of Amazon’s success internationally lies in its role as more than just a digital e-commerce portal, simply providing a shop front for retailers. The behemoth’s ‘you sell it, we ship it’ Fulfillment by Amazon service, enabling sellers to utilise Amazon’s network of fulfilment centres to pick, pack and ship product for a predictable fee, has ensured it is a full fourth party logistics partner for brands.

Prime provides sellers with another edge in ensuring two-day delivery.

The company also serves up tools to alert sellers to when to restock and manage excess inventory, and recently began penalising sellers who stored product for too long in an effort to encourage them to better manage inventory.

“We hope that Amazon Prime Day launch will serve as a much needed boost to catapult Amazon’s positioning in the market,” Thyagarajan said.

The company’s big annual sale day, Prime Day, which offers discounts to Prime customers hits the Australian market on July 16.

“In the long term, Amazons effect of Australia and New Zealand’s retail industry will be substantial and incumbent retailers will need to be ready to face the challenges with competitive pricing, multichannel convenience and, most importantly, differentiation,” Thyagarajan said.

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