Amazon Australia – friend or foe for Australian retailers?

29 May 2018

Mark Schiavello , National Leader, Retail
Partner, Corporate Finance

In 2017, online marketplace giant Amazon was responsible for ~45% of all US e-commerce sales. Australian retailers simply can’t ignore the potential impact Amazon will have on their business model. 
For Australian retailers, will Amazon be friend or foe? 

As B2B e-commerce looks to replicate B2C shopping experiences for their clients, Amazon is expanding to target audiences that include B2B buyers via Amazon Marketplace.  Amazon Marketplace is an e-commerce platform that enables retailers to sell new or used product alongside Amazon’s regular offerings.  The Amazon Marketplace friendship qualities include:

Traffic, dwell time and spend  

Every good retail strategy contains these words.  What drives traffic, dwell time and spend? Great product!  Amazon is highly focused on sourcing in-demand branded goods to drive substantial traffic into its site.

The traffic flow to Amazon Marketplace will assist you in reaching a broader audience. An audience that may not have heard about your brand.

Amazon users rely heavily on customer reviews.  If customer reviews associated with your brand were to rank highly, the possibilities and growth potential would be endless.

The speed of trust

“If people like you they’ll listen to you, but if they trust you they’ll do business with you.” Approximately 85% of online shoppers avoid unsecured websites.  Relative to little known brands, Amazon has the trust factor advantage. 

Are costs associated with establishing appropriate security protocols prohibitive to executing your e-commerce strategy?  Amazon Marketplace is a trusted platform to facilitate e-commerce retailing.

No picking, no packing, no shipping

In Australia, Amazon is rolling out Fulfilment by Amazon (FBA).  The FBA service means you can focus on selling your product to consumers without worrying about picking, packing, shipping etc.  Under FBA, you just send your products to Amazon’s warehouse and once an order is placed, Amazon will do the rest. 

Some pretty compelling friendship qualities.  What are the foe considerations?  

“The world’s most valuable resource is no longer oil, but data”

When selling on its marketplace, your data is accessible by Amazon.  By leveraging this data, Amazon can roll out products perfectly tailored to customer demand.

Depending on what you are selling, there is always a risk of counterfeiting.  In 2016, Birkenstock quit Amazon in the US following a counterfeit surge. As part of its announcement, Birkenstock USA CEO David Kahan stated:

“The Amazon marketplace, which operates as an ‘open market’ creates an environment where we experience unacceptable business practices which we believe jeopardise our brand.  Policing this activity internally and in partnership with has proven impossible”

You can’t just view e-commerce platforms as a channel, you need to view them as a competitor.

A one size fits all digital platform is not personalisation

Personalisation. Another key ingredient of any good retail strategy.  

In my article, entitled “physical or digital, the choice is both”, I discussed the benefits of merging the physical and digital spaces, ensuring that all touchpoints, journeys and activities are clear and comfortably familiar. Amazon Marketplace is a one-size fits all digital platform with no connection to your brand, your story or your experience.

So, friend or foe?

Like the popular kid at school, Amazon needs to be your friend. But not your best friend.  While Amazon should be a supporting pillar of your omni-channel strategy, you should continue to invest in your own digital strategy so customers start their path to purchase on your website. 

Finally, consider your intellectual property options when leveraging Marketplace and don’t neglect your physical store offering. Over 90% of all retail spend still occurs within the physical environment.