When it comes to Amazon’s entry to Australian retail, there are many and varied opinions on the likely extent of its impact. No one knows for sure what will ensue. Will Amazon disrupt Australian retail? And if it does, to what degree? Or will it resort to a competitive fight with retailers in this diverse market Down Under?
Australian retailers believe the U.S. e-tail giant will find it difficult to replicate its business model in Australia’s retail environment, with its offer of low wages, demanding work conditions, and overnight delivery. Others debate that Amazon will present a data-driven and customer-centric strategy for its foray into the market.
Some are even drawing a parallel with Canada’s response to Amazon’s entry. Since 2011, Amazon has opened a fulfilment centre every year in Canada. However, as of May 2016, only 4% of Canada’s primary household shoppers were Prime members as compared to 37% in the US. Low population density paired with hard-to-get-to regions, makes logistics costlier and more complex compared to US and UK. Amazon’s entry may not have forced Canadian retailers out of business as in the US, but it certainly rattled them, with many investing in online shopping platforms.
While the impact on Australia is yet to unfold, for Amazon the move is largely a replication of its existing platform to a new market: an added footprint in its mission to be earth’s most customer-centric company. Irrespective of its share of the Australian retail market, one thing is for certain. Its entry will push traditional Australian retailers to up their game.
To outwit the behemoth, Australian retailers will need to prioritise three areas of their business.
Amazon’s biggest assets are consumer data and home-grown data science capabilities that allow it to infer and “nudge” actions to help the shopper. It purposefully collects data from multiple customer touch points. From entry through to post purchase experiences, Amazon collates and utilises data points. The reasons it does this are firstly, to know a customer’s search patterns, preferences and buying habits; video and literature consumption; and, voice and family information. Secondly, Amazon does this so that it can use this data to plant nudges that will lead to fulfilment of a customer’s need.
The synthesis of enormous volumes of customer data provides Amazon true insight into customer needs. Its passion to solve a customer’s problem is deep-rooted in their culture. From the beginning, CEO Jeff Bezos would bring an empty chair into meetings to force participants to think about the crucial participant who wasn’t in the room – the customer. Now, this role is played by specially trained employees titled “Customer Experience Bar Raisers”. When they frown, vice presidents tremble.
Amazon focuses not on beating other retailers, but on providing ‘the best shopping’ experience to customers. This obsession has led them to make several innovations in online retailing. Amazon Prime, Alexa, and Fulfilment Centres are innovations based on the insight of serving customers in the best and fastest possible way. Hiring the right people and allowing for ‘high-judgement failure’ are Bezos’ tips to driving innovations that improve customer experience.
“If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table”. It’s time Australian retailers took a cue from Bezos. This is not a story about ‘beating’ Amazon. It’s about getting busy doing the right thing: invest in knowing your customer.
About the author
As Co-founder and Chief Commercial Officer for Ugam, Mihir Kittur is responsible for business development and delivering customer success. He has over 20 years of experience, and has worked closely with clients across the globe, to understand their needs and help create solutions for their success.