INNOVATION

Most Australian Retailers Are Not Ready For Amazon Launch

It's time to prepare and innovate to compete with the giant.

24/03/2017 7:33 PM AEDT | Updated 27/03/2017 3:44 PM AEDT
Mike Segar / Reuters
Only a small minority of Aussie retailers have a plan to challenge Amazon down under.

It's official -- Amazon delivery services are coming to Australia in 2017 and the majority of local retailers don't have a plan to be able to compete with them in the consumer market.

In fact, almost half of the 505 Australian retailers surveyed in new research from Commonwealth Bank were unfazed about the giant online goods distributor's arrival down under, which is tipped for late 2017. Almost a third were unaware they were coming at all and, of those who did know, only 14 percent currently have a business plan in place to be able to compete with Amazon.

National Manager of Retail at Commonwealth Bank Australia (CBA), Jerry Macey, told The Huffington Post Australia the key for Australian retailers in surviving in a business environment that includes companies like Amazon is to innovate their business procedures to find new ways to provide for their customers.

"We don't quite know what [Amazon are] going to land with yet. That is why we're suggesting that an innovative culture is probably the way to combat something that you can't see yet," he said.

"The best way of coping is being agile, being ready, being well planned."

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Delivery services such as Amazon Prime could be headed down under.

Less than half of retailers across the country were deemed to be "innovation active" in terms of how they manage their business structures according to the survey. Macey believes most companies are only innovating small aspects of their services, such as product design, and need to establish a "multi-dimensional method" to be able to respond to the challenge of Amazon.

He told HuffPost Australia the innovativeness of retailers surveyed was measured on a scale between minus 100 and 100, where a score of minus 100 suggests no innovation at all and 100 suggests multi-focused innovation that results in business strategies and products consumers have not seen before.

"What we found with retail on average, if you took all of the retailers in our survey, is [the score] comes down to 26.2 percent on our innovative scale, so only just innovating," he said.

"What we did find is that, if you're in retail, you're more likely to be innovating, but you're innovating in small ways rather than in a strategic multi-dimensional method.

"If they create a more innovative culture, we know that delivers you a greater return. They might be squeezed in some ways by Amazon being here but in other ways might lead to new innovations."

Getty Images
For an annual fee of around $100, Amazon Prime offers free and fast delivery.

In the United States, Amazon already accounts for every one in every two dollars spent on e-commerce due to its services such as Amazon Prime, where customers can spend an annual fee of around $100 for free and fast delivery, according to the ABC.

The company currently caters to around 60 million households in the country and is looking at establishing itself in multiple retail sectors in Australia, including in the sale of groceries. In December, Amazon announced the launch of Amazon Go in the US -- a store that allows customers to walk into an unstaffed store, take what they like off the shelves to buy and then leave.

Australians can already order from Amazon online, however there is yet to be an established delivery service under the company on-the-ground across the nation.

So what does that mean for the everyday Australian consumer and how will they be affected when Amazon lands here?

Head of Media and Communications at consumer advocacy group Choice, Tom Godfrey said Amazon's "appealing" innovation geared towards its customers will immediately attract the attention of people in Australia.

"Amazon had a tremendous impact when it came to the way Australians buy books and engage in that particular market," he said.

"To think that they are going to be pushing into groceries and movies, they are very, very big and very, very powerful and they tend to innovate in a way that is very appealing to consumers.

"I think for local industry it's going to be a real wake up call... Amazon is a serious disruptor, ultimately what these guys do is they come in and completely dominate and shake up markets. For sectors that have been failing to innovate and acting in consumers' best interests, Amazon will come in and turn the industry on its head."

JASON REDMOND / Reuters
Amazon Go stores have no staff inside and let customers come and go to purchase as they please.

Despite Amazon's popularity, Godfrey also said he believes Australian retailers have the capacity to challenge the giant so long as they act in customers' best interests and provide an alternative choice in the market.

"I think what would be great is for Australian retailers to respond to the challenge that Amazon brings because what we want is a vibrant and competitive market that sees local retailers taking on Amazon and providing Australian consumers with a real choice," he said.

"Aussie retailers are definitely well positioned because of their current local dominance to continue to have a very strong position but they will need to respond to the challenge that Amazon is bringing. If they act in their customers' best interests then they're very well positioned to take Amazon on."

Macey said he believes there are Australian retailers currently in the market that will welcome the launch of Amazon delivery services in Australia because it could offer them another way to sell their products.

"What we've seen is that about 11 percent of retailers said they were excited about Amazon coming and when we asked why, they said it was mainly because they can see another route to market, Amazon could be a route through which to sell their products," he said.

"What we're seeing is another stimulus for Australian retailers to become more innovative, they're innovating at the moment but on individual things. As they get more innovative, they'll start bringing together products, process, marketing and organisational and structural changes and once they do that I think they'll be able to compete with Amazon and anyone else who arrives."

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