What does Amazon’s imminent arrival mean for Australian retailers?

Did Jeff Bezos have any idea of how big his startup would become, when he named it Amazon?

According to Quora.com, Jeff Bezos called his business Amazon after the biggest river in the world (after two earlier name attempts). It turns out that Jeff planned to make his bookstore the biggest in the world.  As Amazon.com is now the largest online retailer in the world, he has certainly made that idea a reality!

Fast forward 20 years or so and the aptly named Amazon is now the heavy weight champion of the eCommerce space, with 36% of the total world’s eCommerce industry.  In late March, Jeff Bezos, founder and CEO of Amazon Inc., surpassed tycoon investor Warren Buffett to become the world’s second wealthiest person. According to Forbes, Bezos’ net worth is now at a staggering $76.2 billion, up $3 billion in only the past week due to Amazon’s stock rising almost 5%.

What does Amazon’s arrival in Australia mean for your business?

eCommerce has grown exponentially over the past decade and online retailers that got in early have enjoyed the wave of success that has come with the adoption of online shopping and mobile eCommerce.

With a consumer mindset of “I want it NOW”, retailers of all shapes and sizes have had to scramble to get their online platforms shopper friendly.  Today, 71% of shoppers today believe that they will get a better deal online than in-store. All of this has meant retailers have become reliant on their online streams of income and many have invested significantly in order to provide a seamless online service.

Can Amazon destroy retail as we currently know it?

 

amazon and you're done for

There has been a lot of scaremongering lately and only time will tell.  Logic dictates that retailers with a bespoke product or service, with a loyal fan base of customers will survive.  Retailers who put the customer first and provide an experience, not just a transaction, will too.

Amazon is a behemoth but is still just an online retailer. Bricks and mortar stores are still the preference for many shoppers, who enjoy the tactile experience of browsing aisles and the personalised service from retail staff.

  • Associate Professor Gary Mortimer, a retail expert at Queensland University of Technology, thinks Amazon will face its own struggles when it hits Australia, and the “sky will not fall in”.
  • Prof Mortimer said “Australian shoppers spent almost $22 billion online in 2016.This may sound like a lot but it actually only represents about 7 per cent of total shopping, meaning most of the money is going into local shopping centres.
  • Australians’ online spending is insignificant compared to the US and the UK.
  • American shoppers spent $152 billion online last year and consumers in the UK eclipsed that at $215 billion.  Amazon infiltrated overseas markets well and has been able to compete with other online retailers, but Prof Mortimer said the online giant is unlikely to replicate its UK and US success in Australia.

Why it might not work?

Prof Mortimer said people were creatures of habit.  “How do we get Aussies who love ducking down to the local supermarket to start shopping online?  He shares his views below:

  • People are used to buying the brands they knew, liked and could afford and even for those who regularly shopped online, it’s not likely they’ll just start shopping elsewhere
  • The online market is already flooded with different stores, including department stores and more independent retailers
  • Every month people’s shopping lists were virtually the same, and they spent around the same amount of money
  • For those Australians who buy their groceries online, they are already well-serviced with online stores like Coles, Woolworths and Aussie Farmers Direct, so Amazon needs to offer Australian customers a different experience.

There has been a lot of speculation in the media and retailers have been told they are unprepared for Amazon‘s incursion and would lose customers to Amazon.  “Only yesterday did we see Amazon officially announce they were expanding its offering to Australia and we don’t actually know what that means,” Prof Mortimer said. “I genuinely think if it comes, a proportion of Australian consumers will trial it. But it will generally be consumers that are already using the online shopping platform.  “We know there are some frequent online shoppers and infrequent online shoppers.”

Prof Mortimer did not expect online shopping would be the only way to purchase products in the future.  He said “research showed people who shopped online, would continue to do so, but those who didn’t, would continue to be non-users.  Obviously there needs to be a driver to convince shoppers to switch channels.  Maybe it will have to be really low cost or could be the time it takes an order to get to a consumer.  There needs to be an element of competition.”

If an online store was offering delivery within 48 hours, Amazon would have to beat that.  However, it’s harder to make those promises in Australia.  Prof Mortimer said cities in the UK and the US were more populated, meaning most of the online shoppers lived around the same area.  But Australia is much more vast and less than half of us live in the three major capital cities.

“I think Amazon will need to adapt what it will offer here in Australia simply because it’s a much smaller population, it’s more dispersed, and there’s a lower proportion of retail spending,” Prof Mortimer said.

How can you take steps to protect your business?

  • Focus on doing what you do to the very best of your capability, rise to the challenge and look for ways to add value for customers
  • Go the extra mile for customers
  • Offer flexible payment options
  • Look at your fulfillment processes, how long does it take to get an order out the door?  Offer flexible shipping options with live rates, not flat rate shipping and offer free shipping wherever possible (65% customers will abandon the cart if shipping costs are too high)
  • To remain competitive, you might consider offering promotional free shipping options at an order value threshold, or a free ship-to-store or pickup in-store option.
  • Thank your customers!
  • Always respond to enquiries and issues promptly, so they know you are working on it, an ignored customer will become an irate customer very quickly
  • Customer service needs to be one of the most important aspects of your business – happy customers who feel valuable and respected, return again and again

Review and improve your customers’ experience

There are too many businesses failing to provide an exceptional customer experience and online retailers are considered to be some of the worst culprits.

In a global research study, Qualtrics surveyed 1,700 online shoppers including respondents from Australia and New Zealand. These customers said they believe their feedback is ignored 40% of the time, regardless of whether complaints are given via social media, surveys, or made directly to staff.

In this age of social media and instant communication, customers share their experiences broadly, especially if those experiences are negative.

People vote with their wallets, taking their business elsewhere based on the reviews left by other customers, friends and even strangers online. Businesses therefore need to understand that the customer experience is critical to financial success.  

Here are some great stats from an article published recently on dynamicbusiness.com.au which highlights some of the areas online retailers need to address:

  • Online shoppers have high expectations for how quickly retailers should reply to questions and complaints.
  • Nearly half (46%) of respondents expect a response to their social media post on the day of posting, while the majority of online shoppers expect a response within a few days (82%).
  • The same survey found that 61% of shoppers base their expectations on opinions shared through social media or referrals from family and friends.  Therefore, retailers and other businesses that fail to collect, analyse, and, most importantly, act on feedback from customers are missing out on a huge opportunity to grow their businesses.
  • Most companies offer a platform for feedback, whether it’s a simple Facebook page or a more formal survey process. However, too many companies gather this feedback then fail to act on it.

“The damage that can be done by asking for feedback then failing to act on it is significant, and can be worse than never asking for feedback at all. This is because customers develop a more intensely negative opinion of the brand if they’re asked for feedback, then never see a result, compared with how they would feel if they had never had the opportunity to provide feedback. People want to be listened to. When a company says it’s listening, then demonstrates that it hasn’t listened, people feel betrayed.   Bill McMurray, DynamicBusiness.com.au

Improve, fine-tune and automate your online experience all the way through to delivery

Finally, invest in quality systems and software to automate clunky processes and fine-tune your existing systems so that your online experience is impeccable.  All of these key areas are fundamental in providing an outstanding experience with your brand which in turn, will ensure customers leave a positive review, recommend you to their friends and most importantly, come back.

As the old adage goes, it costs between 4 and 10 times more to acquire a new customer than it does to keep an existing one.    If you have an unhappy customer, solve their issue.  Replace it, refund it, do not let them leave your business unhappy as they will tell many others who are now lost customers for you.  Look at ways to get your customers coming back again and again: introduce VIP discounts, discounted subscription services and Valued Member Only promotions can all help to build value for your customers and keep your brand top of mind.

Customers will undoubtedly continue to support their favourite brands just as they always have.  If you look after your customers, they will continue to look after you.

Many will view Amazon’s arrival as a threat, as it undoubtedly is, but perhaps it should also be viewed as more of an opportunity?

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