Why Almost Everybody is Missing the Most Important Point in Their Solution to Amazon’s Threat to Australian Retailers

AMAZON'S THREAT TO AUSTRALIAN RETAILERS

Why Almost Everybody is Missing the Most Important Point in Their Solution to Amazon’s Threat to Australian Retailers

HOW BIG AMAZON’S THREAT TO AUSTRALIAN RETAILERS?

Yesterday (on 2nd November 2017) I happened to briefly glance at the Australian Financial Review – the key finance newspaper in this country while I was waiting in the lobby for a meeting. Almost the entire paper was devoted to just one single topic – AMAZON’S THREAT TO AUSTRALIAN RETAILERS!

No more do I  subscribe to this newspaper,  because it appears to be growing more and more out of touch with business reality, and becoming more a shill for vendors with deep advertising budgets, and small brains.  Its content,  in terms of financial and economic news is excellent, but somehow the financial journalists always seem to miss the major shifts in the business models – inclduing the latest move towards B2B Networks.

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Yesterday’s newspaper seemed to be predominantly dedicated to a conference on e-commerce related subjects. I do not remember the specific topic of the conference, and it does not even matter because the entire debate was centered around Amazon’s entry into Australian market place, and the threat it poses to the Australian retailers and businesses.

Indeed, the organisers, and the newspaper, had identified the burning issue of the day for Australian businesses. They had not only highlighted all the right red flags, but had clearly heralded Amazon’s threat to Australian Retailers as the key front shaping the battle into the next year. Looking at the issues, I almost reconsidered my decision to stop subscribing to the newspaper.

But, alas,  a little more unpacking of the pages revealed that almost all the solutions (to Amazon’s threat to Australian retailers)  were merely window dressing costing a lot of money. Most of them were marketing and sales related, or new age technology related.

Do We Have the Right Solutions to Amazon’s  Threat To Australian Retailers?

What people forget is that Amazon’s success is even more dependent on its incredible supply chain. Amazon’s threat to Australian retailers in not based on its new age technology, as much as it is based on its carefully crafted integral supply chain.

Fighting this successful behemoth without an equally effective supply chain is akin to deciding to fight against nuclear missiles with swords.

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Sad reality is that most people, even in the lofted positions such as boards, still do not still know what supply chain really means. If you doubt me – just watch the short (1.5 minutes) video below, and conduct the experiment with 10 people you know:

Lest I leave you with a wrong conclusion, I am not totally writing off these marketing and technology solutions. Indeed, they do have a place in the overall campaign.

But, if you get an impression from the newspaper (or the conference that seemed to dominate yesterday’s paper) that somehow you are going to outmarket Amazon just using such solutions – you better think again.

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Whether you are a corner store, or the world’s largest retailer of the decade – one reality stands firm above all else: Nothing beats a carefully crafted supply chain strategy, executed with precision and flexibility. This point cannot be emphasised enough.

If, it is your job to combat in your company the looming Amazon’s threat to Australian retailers, read the following line 100 times.

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Now the key question is – HOW DO YOU GO ABOUT WORKING OUT A CAREFULLY CRAFTED STRATEGY IN RESPONSE TO AMAZON’S THREAT TO AUSTRALIAN RETAILERS?

I have written extensively in many other blog posts on how to do just that – all you have to do is explore a bit in the categories and tags on the right of this page. Some of the titles from over the year are in the image on top of this page.

For substantive business leaders, who want to make real and deep positive impact – I do recommend my book The 5-STAR Business Networks.

If you have the budget, it is also worthwhile asking for a workshop based on the same material – but we only have limited slots, and normally have a big backlog for that.


Copyright - These concepts, frameworks and ideas are copyright of GLOBAL SUPPLY CHAIN GROUP from the time of their creation. Do NOT copy these without permission and proper attribution.

Notes:

  1. These ideas and concepts will be usually expressed by our thought leaders in multiple forums - conferences, speeches, books, reports, workshops, videos and training. The date shown above the article refers to the day when this website was last reformatted. This blog post or article may have been written anytime prior to that date. 
  2. All anecdotes are based on true stories to highlight the key points of the article - some details are changed to protect identification of the parties involved. 
  3. You are encouraged to comment below - your real identity and email will not be revealed when your comment is displayed.  Insightful comments will be  featured, and will win a copy of one of our books. Please keep the comments relevant, decorous and respectful of everyone. All comments represent opinions of the commentators.

Vivek Sood

MORE INTERESTING READING
  • Amazon is multinational company, so It can handle the threats easily. But what about small scale businesses Looking to your valuable advice as I run a small business.

    • Hey Robert, the development of Small and medium enterprises (SMEs) showed growing trend in Indonesia and also in Pekanbaru. Although small-scale enterprises, but it has very meaningful role to contribute to prop up the national economy and create many new jobs.

    • Small businesses will always exist. Find a niche, own the niche and protect the niche better than anyone else. That is one formula.

      Another one is – develop a symbiotic relationship with the big guys such as Amazon.
      There will be other ways too – but they will depend on your particular circumstances. It is dangerous to go into personalised advise over comments section of a blog!

  • Amazon Australia had continued to invest heavily in its infrastructure and people. While it was unrealistic to expect the creation of a multi-billion-dollar business overnight, Amazon would be making a mark. Amazon has set the cat amongst the pigeons, bringing scale and capabilities that have the potential to strike in those areas in which Australian retailers are most vulnerable.

  • The real threat to Australian retail lies in Amazon’s business model. It is a low-margin retailer that owns several other highly profitable and fast-growing businesses, such as cloud services. These other businesses can and do cross-subsidise its retail operations. The net profit margins for Australian retailers are, for the most part, quite low, round 2-3%. This means they don’t have much room to move on price. If they drop prices, many will become unprofitable. So even if Amazon doesn’t start a price war in Australia, its business model is such that prices will be extremely competitive.

  • Amazon, then, not only has a large, low-margin online retail offering, but is supported by a fast-growing, high-margin cloud service. Most Australian retailers will need to look at other ways of saving costs if they are to remain competitive with Amazon. For example, Coles and Woolworths can put even more pressure on suppliers to reduce their costs. Coles has recently signalled that it will pursue this strategy. And all of our retailers can try to reduce the cost of leases, and shift or reduce staff.

  • Advances in artificial intelligence (AI) had made it easier to offer personalised and richer shopping experiences. Retailers equipped with AI tools can significantly improve their customers’ experience, and ultimately translate this into increased revenue. Despite advances in technology, the market was more competitive than ever. Australian retailers had been reluctant to expand overseas, despite opportunities in growing markets such as South-East Asia and China. More than 50 per cent of respondent retailers were not generating revenue from overseas, and only one third were considering building overseas operations. But with the Australian market becoming more saturated, it’s only a matter of time before they do, and perhaps have to, shift their attentions offshore.

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