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Amazon is coming to Australia: Five tips to prepare your business

Amazon is coming to Australia: Five tips to prepare your business

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

AmazonThreat

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

AmazonFBA

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

CustomerService

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

CreateProduct

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

ContentMarketing

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

FreeShipping

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.

 

Conclusion

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!

 

AfterPay, zipPay, zipMoney, OpenPay, Sezzle: Choosing the Right “Buy Now, Pay Later” Program for Your Online Business

AfterPay, zipPay, zipMoney, OpenPay, Sezzle: Choosing the Right “Buy Now, Pay Later” Program for Your Online Business

With the recent introduction of “buy now, pay later” (BNPL) solutions in Australia, many businesses are now scrambling to integrate these programs with their online front. While these services can be very beneficial for increasing sales revenue, there are now enough options out there that merchants can be confused as to which would best integrate with their business. This article will analyse the different “buy now, pay later” programs that are currently operating in Australia, with a detailed breakdown of each service.

 

Why integrate “Buy Now, Pay Later” services? 

Layby payment options have existed for a long time in brick-and-mortar stores, but this often carries significant risk for the retailer. This is where BNPL services come in: companies such as ZipPay provide customers with an alternative payment option: they can decide to pay for their online purchases over a period of time. For example, with AfterPay, customers pay with fortnightly instalments. These services are usually integrated with your online store, with the option to use them at checkout.

The main benefit of such services is that they have the potential to substantially increase your sales revenue. As has been the case since the advent of e-Commerce, the more checkout options are available to the customer, the better your web conversion rates will be. Compounding on this simple reason is the fact that these new BNPL payment options can lead to a significant difference in a customer’s purchase decision – many merchants who have integrated AfterPay have seen an increase in their Average Order Value. At the same time, these service providers take on the risk for the timed payments, and charge the merchant a small fee for their trouble.

 

Afterpay vs zipPay vs zipMoney vs OpenPay vs Sezzle

With that in mind, now comes the tricky part for many merchants: deciding which service to use. Understanding the pros and cons of each service is crucial, as each service has differences that make the choice significant enough to affect your online business.

 At the moment, there are five companies offering Buy Now, Pay Later solutions in Australia:

Afterpay

Afterpay-logo-v3

Afterpay gives customers the option to pay two weeks later, and in four fortnightly instalments – the first instalment payment is immediate for first-time users and for orders amounting to $500 or more. Instalments are charged directly to the customer’s credit/debit card, and Afterpay charges a $10 late fee for instalments unpaid.

 

Integration

Afterpay offers integration with many e-Commerce back-ends: Shopify, Magento, WooCommerce, Neto, IslandPacific, Infinity, Futura4Retail, and Commerce Vision. Integrating Afterpay with these platforms is relatively easy. For example, integration with WooCommerce simply involves installing a plugin.

After integration, the option to pay with Afterpay appears on your product pages, like this:

 

Screen Shot 2017-09-07 at 11.30.58 AM

In addition, Afterpay has a technical support team of specialists who can easily assist you with integration and maintenance.

 

Costs

 Merchants

Afterpay charges 30 cents per transaction, plus 4-6% of the order value. This is higher than credit card companies and most other BNPL services.

 

Customers

On the other hand, customers do not pay any fees or interest for their purchases.

 

ZipPay and ZipMoney

zipPay-Logo-Grayscale

ZipMoney

ZipPay and ZipMoney are affiliated companies that offer very similar interest-free BNPL services, but with some basic differences.

For one, ZipPay functions like Afterpay, charging a small percentage of the total order value to the merchant. The difference here is that ZipPay is designed for smaller purchases (under $1000), while ZipMoney is targeted at merchants and retailers who sell more expensive products and services (such as educational courses, digital cameras, furniture etc). ZipMoney allows for purchases up to $10,000, which is significantly higher than with ZipPay. Therefore, the fee structure and procedure for these two services differ significantly.

ZipPay has no fixed instalment payment plan, which means a customer can choose to pay via weekly or monthly instalments. Customers are required to pay at least $40 a month for their purchases.

 

Integration

Both ZipPay and ZipMoney are easily integrated with e-Commerce platforms such as Shopify, WooCommerce, BigCartel, and more. In addition, as with most of these new BNPL startups, ZipPay & ZipMoney have a technical support team ready to assist retailers with integration.

Like Afterpay, the option for ZipPay/ZipMoney appears on your product page like so:

Screen Shot 2017-09-07 at 2.17.43 PM

 

Screen Shot 2017-09-07 at 2.19.09 PM

ZipPay and ZipMoney: Note the price difference between these two items.

 

Costs

ZipPay:

Merchants

ZipPay charges 15 cents per transaction, plus a 2-4% commission fee to its merchant, which is noticeably lower than AfterPay.

 

Customers

ZipPay is interest-free for customers; however, they will have to pay a “maintenance” fee of $5 if they have an outstanding balance at the end of each month.

 

ZipMoney:

Merchants

ZipMoney has comparatively stringent requirements for merchants – to be eligible, they are required to have had a revenue of at least $500,000 for the last financial year, and must be in operation for 12 months or more. In addition, ZipMoney fees vary based on the interest-free period chosen by merchants. For example: A merchant who chooses to integrate ZipMoney on their webstore with a 3 month interest-free payment plan is charged a 3% fee, and 6 months of interest-free payments would incur a 5% fee, and so on.

 

Customers

Unlike ZipPay, ZipMoney charges the customer an interest rate for purchases. Also, ZipMoney customers are subject to credit checks, while services like Afterpay do not require any.

 

OpenPay

openpay-ana-shared-mediaV2 

Openpay is a relatively new BNPL startup – at the time of writing, their service is offered on a small handful of online retailers. The service shares many similarities with AfterPay and ZipMoney/ZipPay, and can be thought of as having a combination of features of the two. OpenPay has a purchase limit of $10,000, and also allows for a longer financing term of up to 12 months.

 

Integration

Currently, OpenPay only supports integration with WooCommerce and Magento. Since the startup is relatively new, we can expect integration with more e-Commerce platforms in the near future. From what we’ve found, payment options with OpenPay appear only upon checkout:

Screen Shot 2017-09-07 at 3.01.57 PM

 

Costs

Merchants

Openpay does not reveal the fee structure for their service; at the moment, they determine rates based on the type and size of your business.

 

Customers

OpenPay offers interest-free payments for customers. However, late fees apply, and customers have to pay a nominal fee of $2-3 for long-term financing options.

 

Sezzle

 sezzle

Sezzle is a Minneapolis-based company founded in 2016, with their services currently used by around 700 online retailers. In November 2018, Sezzle lined up a $100 million line of credit from investment firm Bastion, so expect further growth from this startup.

Integration

Currently, Sezzle supports integration with Spotify, WooCommerce, Magento, and Salesforce Commerce Cloud, with plans to add Big Commerce and 3D cart to its list soon. At check-out, consumers who are first-time Sezzle users will fill out their details, after which Sezzle will determine their creditworthiness based on the bank account, cash flow, fees charged and so on.

 

Costs

Merchants

Sezzle charges 6% + 30cents per transaction. For each transaction, the merchant receives the full payment upfront, unless otherwise agreed. As Sezzle is a US-based company, transactions are processed in USD, and currency exchange rates will vary.

Customers

Sezzle offers interest-free payment plans with four instalments; the first payment is charged at checkout, with the remaining payments charged every 2 weeks. However, a $10 fee applies to failed payments, as well as a $5 fee for rescheduled payments.

 

The Breakdown

 

Service Provider

Payment Plans Merchant Fees e-Commerce Platforms

Credit Line

AfterPay

Fixed; four Fortnightly interest-free payments 30cents plus 4-6% of total order value WooCommerce, Shopify, Magento, Neto, IslandPacific, Infinity, Futura4Retail, Commerce Vision

Up to $1200

ZipPay

Flexible (weekly or monthly); interest-free payments, minimum $40 a month 15 cents plus 2-4% of total order value

WooCommerce, Shopify, Magento, Neto

Up to $1000

ZipMoney

Three-month guaranteed interest-free payments

Varies depending on interest-free period (e.g. 3% for 3 month interest-free)

WooCommerce, Shopify, Magento, Neto

Up to $10,000

OpenPay Interest-free payments, small fee for long-term payments (up to 12 months) Varies, by consultation WooCommerce, Shopify, Magento

Up to $10,000

Sezzle 4 interest-free payments spread over 6 weeks  6% + 30cents per transaction WooCommerce, Shopify, Magento, Salesforce Commerce Cloud, Big Commerce (Coming Soon), 3DCart (Coming Soon)

 

 

Conclusion

At the moment, ZipPay and Afterpay are the most commonly used BNPL services in Australia. While Afterpay charges a substantially higher fee on their services, they feature a wider range of integration options with e-Commerce platforms, and are now accepted at a wide variety of major retailers and webstores, such as Big W and Myer. OpenPay is currently heavily focused on offering their payment plans at physical stores, but this could change soon as they hope to expand their portfolio of online merchants. Sezzle is an emerging player in BNPL services; while mainly used by US-based retailers, Australian retailers could benefit if they are looking to capture North American customers.

With all that has been said, there is no one-size-fits-all solution for your e-Commerce business: this depends on several factors such as your product offering and target market/demographic. We hope this article serves its purpose as a quick primer on this new component of e-Commerce that is quickly becoming essential to improving sales. If you are interested in integrating a BNPL service with your online business, why not contact us today for a free quote and consultation?

 

 

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