Amazon's Impending Arrival - Def-con 4 for Retail?

Some have predicted the arrival of Amazon will mark the beginning of a sort of Aussie-retailer apocalypse, while others have welcomed the variety and increased transparency the e-commerce giant will provide.

No matter which side of the fence you sit on, Amazon’s arrival is HUGE news. Its annual world-wide sales revenue eclipses that of Coles, Woolworths, Myer, Harvey Norman and JB Hi-Fi put together. Quite simply, it’s the biggest thing to ever happen to the Australian retail industry.

From a brand perspective, Amazon arrived long ago. Its famed online experience, legendary delivery times and the promise of price cuts are already firmly entrenched in the minds of many Australian consumers. But the question is whether that consumer excitement will translate into a flood of changed retail behaviour and destroy existing national retailers.

Harvey Norman Chairman, Gerry Harvey is undoubtedly the most outspoken business leader on the Amazon-is-going-to-destroy-everything side of the debate. Harvey’s main argument to that end is that he believes Amazon’s grand plan within the Australian market is to undercut local retailers on price (unconfirmed sources saying up to 30%), and remove the need for consumers to visit physical stores.

This seems to be an overriding concern for the traditional bricks-and-mortar retailers, that Amazon’s legendary online experience will draw more people to shopping online and thus erode their market share. And fair enough. With trends showing that more and more Australians (particularly young Australians) carry a mobile-first mindset, many Australian businesses are underprepared.

A recent study by PayPal Australia showed that 1 in 2 businesses – particularly small and midsize businesses – underestimate the importance of having a top-notch mobile experience and in some cases are unable to take mobile payments at all. Big problem. There’s little doubt that Amazon will quickly capitalise on this and move to steal that market share.

There are some digitally savvy businesses that are far more upbeat – seeing that increased online activity as an opportunity rather than a threat. Co-founder and CEO of Melbourne-based Brosa, Ivan Lim, has said that the key follow-on effect from Amazon’s arrival will be that it normalises online shopping for a larger proportion of the Australian population. As the number of people shopping online increases, so too does market size – which can only be a good thing for other e-commerce players. For Brosa (or many other new online retailers), the key protection is in its strong identity. It has a clearly defined offering around which a distinct brand is built.

It seems that brand identity will become an increasingly crucial battleground over the coming years. And many online businesses are now feverishly working to cement their offerings and build clear brand associations as a means of creating their niche and separating themselves from the giant marketplace that is bearing down upon them.

Amazon will change everything. But whether or not it will decimate the Australian retail sector can only be told with time. What is certain is that trying to compete with the giant on price or variety seems like a fast-track to ruin. Through a keen focus on brand and customer experience, businesses will be able to stake their claim within the ecommerce sector and continue to flourish.