Earlier this year we saw the announcement that Amazon will launch in Australia with local warehousing. In the Internet connected world we live in, you can, of course, already buy a huge number of products from Amazon but there is then a delay from the time you order to when you receive the product. Local warehousing reduces that timeframe dramatically. Amazon Now, one of the many additional services, promises to deliver certain products, such as groceries, in under an hour! Good luck delivering on that promise in Sydney traffic! In the US, Amazon has a 50 per cent market share of all e-commerce transactions.
And that is the important point. All e-commerce transactions. Not all transactions.
For local retailers scared about the onslaught of e-commerce, the first thing is to look at the market share. The official figures from the Australian Bureau of Statistics show that online purchases make up 4 per cent of total sales. That still adds up to a few dollars but it is not complete doom and gloom for our Australian retailers. Despite the Amazon presence in the US, Walmart still has 4,672 stores across the country. I am not suggesting that physical retailers ignore the threat of online purchasing, but it needs to be kept in perspective.
The current retail environment in Australia is not the strongest the sector has ever been. So far this year, Myer and Harvey Norman have seen declines in their stock prices of 30 per cent and JB has lost 15 per cent. Myer’s total sales for this year fell 3.3 per cent and the department stores category in official retail numbers saw shopping malls record their ninth consecutive monthly decline.
This is all before Amazon has actually arrived.
So what will Amazon offer when it arrives and how long will we have before taking a trip to the shopping mall is something we reminisce about? Using the US as an example, at last count there were 488 million products offered for sale on Amazon USA. That is not a typo – that is million. Try displaying that many products at your local department store! The top-selling category is Electronics followed by Digital Music; Home & Kitchen; Books; Automotive Parts and Sports & Outdoors. At the other extreme, the lowest selling categories are Wine; Gift Cards; Courses and Magazine Subscriptions.
The message here is that if you have a retail environment that sells products in one of the top-selling categories, then you need to have more to offer than just a product range and a good price. The first stores that come to mind are the likes of JB; Harvey Norman and Good Guys. Many of their advertising pitches are based around prices and they sell electronics and goods for the home and kitchen – the number one and three categories on the Amazon list.
What I am sure all of these retailers are trying to plan right now is how they can make their offering different to the online experience. Take something that can’t be delivered online and make that part of the sale. Make shopping not just a transaction but an experience. Make it something enjoyable. Make it different. Make it unique. Whatever you do, don’t advertise that you have the best range and the cheapest price because that is a game that I don’t think a retailer can beat Amazon on. Ultimately, the real winner from all of this should be the Consumer. Better ranges, better prices, more focus on what a customer wants. That all sounds great. I look forward to seeing how the Amazon challenge rolls out over the next five years.
App of the Week this week is Magisto. I have lots of videos on my phone of all sorts of fun things. I am going to edit them ‘one day’. Magisto uses artificial intelligence and automatically creates an edited video from your library of videos. They may not be perfect, but they are better than doing nothing with those videos!
Mathew Dickerson