With plans to begin operating in Australia by the end of 2018, Amazon’s arrival heralds a new era for Australian e-commerce and retail. Long established as an e-Commerce juggernaut, Amazon’s instantly recognisable brand name and their formidable logistics abilities are expected to pose a major threat to many retail stalwarts in Australia – household names such as Woolworths, Myer, Coles and Kmart are all gearing up for battle. It is clear that the majority of brick-and-mortar retailers in Australia will be feeling the brunt of Amazon’s arrival – with retail sales projected to experience a significant decline in the coming years. However, what is less certain is how Amazon will affect the e-commerce landscape in Australia.
At Web Design Market, we are dedicated to helping our clients grow and expand their businesses on the online front. Amazon’s expansion Down Under will no doubt change our clients’ businesses in many ways. This article therefore serves to help business owners understand the impact of Amazon’s arrival, and also how they can prepare for a more competitive online retail landscape.
Understanding the Amazon Threat
Currently, many Australian businesses are either unaware, or unfazed by Amazon. In Commonwealth Bank’s recent Retail Insights report, it was found that only 70% of retailers were aware of Amazon’s plans for Australian expansion. Of this 70%, only 14% had a strategy ready for the challenge ahead of them; this means that less than 10% of retailers in Australia are adequately prepared!
This is very worrying when you consider the changes that are likely to come about as a result of Amazon’s arrival. To put the threat into perspective, let’s look at some facts and figures. Market research by Slice Intelligence has shown that Amazon is absolutely dominating the online retail market in the United States: In 2016, a whopping 43% of all online retail sales were done via Amazon – total net sales of $136 billion in 2016. And that’s just in the United States.
In Germany, Amazon’s second largest market, retailers such as Zalando and Otto are now far behind while Amazon holds 13.1% of the e-commerce share. German retailer Otto now comes in second, with just 3.8% of the e-commerce market share.
As a consultant for Amazon Australia was recently overheard saying, “[Amazon is] going to destroy the retail environment in Australia“. As brash as that statement sounds, how true is it? What, exactly, would happen to the Australian retail and e-commerce landscape when Amazon arrives? Analysts and experts can only predict the full extent of the impact, but here are some things we are certain of.
1. Prices will fall
Amazon’s arrival means that many products will become cheaper. We expect Amazon to undercut local retailers for their products – as they have been known to do so in the past. The online giant will no doubt be willing to post losses in exchange for gaining a foothold in market share, which will also likely lead to price cuts at other retailers as they try to stay competitive.
2. Expectations for shipping and order fulfilment will change
Amazon is known for its Prime service – with free shipping on millions of items that can be as fast as two hours to certain locations. This will make a massive difference in the expectations of consumers in retail. Amazon’s supply chain management and level of automation in their logistic systems is unparalleled – smaller businesses in Australia may soon find it hard to compete with Amazon for Prime products that customers can receive on the same day, and with free shipping.
3. Organic search traffic will be ‘siphoned’ by Amazon
The Amazon domain name is one of the most trusted and authoritative on the internet. Amazon’s arrival means that smaller, newer e-Commerce retailers will suddenly have to compete with a website that dominates organic search results on Google. For local e-Commerce businesses, this can be very worrying, especially if they do not have a solid SEO/AdWords strategy in place. Many businesses may see a dip in organic traffic with Amazon dominating the front page of Google.
Five Tips to Help You Compete with Amazon
With the three points outlined above, it is not hard to see how many Australian businesses will struggle under Amazon’s enormous power. However, there are certainly effective strategies that business owners can put together at the moment that may allow them to maintain their competitiveness. These are five actionable strategies that we would recommend to all e-Commerce businesses in Australia. These five strategies will help you start preparing for Amazon’s inevitable arrival such that you won’t be severely affected when the time comes.
1. Create an Amazon Seller account
As the adage goes, “If you can’t beat them, join them.” Amazon’s arrival is bound to create some tough competition, so why not start selling your products with them? Amazon’s Seller program makes logistics a breeze. The Fulfilment by Amazon (FBA) program gives sellers the ability to ship their products to a fulfilment center, where Amazon will handle shipping, tracking, and returns. This may mean lower overheads for you, since Amazon will most likely be able to fulfil orders at much lower shipping rates. Products sold through the FBA program also have free Prime shipping, which is enticing to customers shopping on Amazon.
In addition, selling your products on Amazon means a much greater exposure to your target markets. Amazon’s global reach means that your product can easily be introduced to a global market.
2. Focus on building relationships with customer service
Amazon is a massive corporation, and its size and scale means that they are unable to provide personalised customer service. There is bound to be a more corporate, robotic feel to their customer support. What a smaller business can do, then, is strengthen their brand identity by creating meaningful customer relationships. There are many ways to do this, and some creativity may be required, but one actionable task that every business can start with is to improve communication via social media channels: respond quickly to customer enquiries, and keep your customer base in the loop with updates, promotions, and deals.
Businesses should now focus on going above and beyond in customer service – overdelivering on their promises. Stellar customer service and a strong brand identity are essential to creating an audience of loyal customers. Ultimately, this will help you stay competitive with Amazon more than anything else. Loyal customers purchase directly from you, and are also likely to spread positive word-of-mouth if they’ve had a good shopping experience. A smaller business with a reputation for fantastic customer support is likely to stick in consumers’ minds. The key here is to ensure that your customers feel like you care about them as a brand. A commonly-known fact is that customer retention is often much more profitable and cost-effective than customer acquisition, so keep this very important point in mind.
3. Create and market a customisable product
Something as simple as engraving your customer’s name on your product could be enough to keep them from jumping over to Amazon. Allowing your customers to customise and personalise your products is a great way to differentiate yourself from other competitors in your niche. Introducing personalised products have proved to be an effective strategy for boosting sales, and your customers are much more likely to recommend your products to their friends and family because of the “uniqueness” that your brand offers. Of course, it wouldn’t hurt to push your customers in the right direction – encourage them to share their customised products. You should also consider having “templates” set up for customisation, as it may be less daunting to a customer if they don’t have to create an entire design from scratch.
An under-looked benefit of introducing personalised items in your niche is that you can often glean valuable insights on consumer preferences – for example, if a particular colour combination for your customisable dress-shirts is doing especially well, you may consider introducing it as a mainstay in your product line.
4. Become an “authority” in your niche with content and email marketing
One thing that Amazon lacks is dominance over niche markets. Their strategy of dominating the entire online retail space means that they will never be considered a premier/specialised retailer for any specific type of product. This is where you can come in: users who tend to make more careful purchase decisions would prefer to buy from a specialised website with good product recommendations and a wide selection. Therefore, by focusing on your specific niche and providing relevant and valuable content, you can establish thought leadership that will pay dividends in the long run. Content marketing is especially effective in this regard; for example, you can provide value to your audience on your social media channels by sharing informative and relevant content. We would also suggest incorporating other tasks in your content marketing strategies, such as writing regular blog posts, creating infographics and editorials, and regular email newsletters packed with interesting and creative content. Remember to show off your expertise in your field/market, and your brand could potentially go viral with the right content.
By establishing yourself as an authority in your niche, you can build a loyal online following that will trust your product selection and recommendations, and also return to you for repeat purchases. Here are some examples of successful content marketing campaigns that may give you some ideas.
5. Offer free shipping and attractive promotions
This last tip is the most obvious, but should not be underestimated. Many argue that free shipping is essential to surviving in today’s online retail environment – if you do not offer free shipping on all or selected products on your e-commerce site, you may quickly find throngs of online customers moving on to a platform that does – case in point, Amazon.
However, we understand that this is not suited to all businesses. Perhaps you have products that are costly to ship. You can still adapt, however, by providing attractive discounts and deals, or by offering super-speedy shipping. The key here is to provide massive savings or value that you think would be enough to retain customers.
To the average business owner, it may be very daunting and scary knowing that Amazon’s arrival in Australia will bring about massive changes. However, we strongly believe that a solid marketing plan can overcome many of the challenges ahead. We hope that this article has helped you better understand the threats many businesses are about to face, and how they can adapt to it. This article was not intended to be the be-all-end-all of competing with Amazon, but rather, a quick primer on the many strategies that businesses can explore to strengthen their brand in the face of an e-commerce Goliath.
In this regard, Web Design Market can certainly help with your digital marketing strategies; we have proven results from a large variety of clients. Contact us today for a free quote!