Retail heavyweight Gerry Harvey says Amazon will have to grapple with the harsh realities of doing business in Australia, and incumbent local businesses have an advantage.
Speaking to The Australian, Harvey said the online retailer’s goal was clearly to “destroy everything in front of them” to achieve dominance, but he agrees with comments made by Wal-Mart executive Roger Corbett last week that Amazon will find Australia’s unique, and expensive, environment a tricky place to do business.
The Harvey Norman boss has previously promised his electronics business will match Amazon on prices and offer better delivery service, and he told The Australian on Monday his business had the advantage of a strong logistics framework that has taken decades to perfect.
“They … can’t deliver overnight like they can in maybe some other places. You want to deliver into Bathurst, of wherever, you’ve got to have the trucks and the drivers that are skilled in what they are doing,” he said.
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“At Harvey Norman our skills set have been built up over 35 years. You can’t do that over from scratch, it doesn’t happen, as you run into so many different obstacles. That’s 100 percent guaranteed they will run into trouble”.
Harvey is far from the only retail stalwart publicly declaring a fight with the global retail. From Woolworths to Myer, local businesses are turning their attention to data, customer engagement and service delivery, as they attempt to use their established networks and processes to get ahead of the game.
Dr Gary Mortimer, an associate professor at Queensland University of Technology, says analysis into Amazon’s ability to perfect logistics in Australia has traditionally compared the wrong markets and elements.
“I think often commentators look to the US and the UK markets, but those markets are very, very different, in terms of population and online shopping density,” Mortimer says.
“Probably a better signpost for the Australian market would be Canada. They launched the Amazon marketplace there in 2010, and online shopping is about 3.6% of sales there, so about half of what it is in Australia.”
Mortimer says there are indications Amazon has faced challenges in the Canadian market, but concrete data is thin on the ground, which makes analysis difficult.
“They have struggled a little bit in that country, the distance is the big challenge there … but at the moment, [the data is] a bit sketchy,” he says.
While local retail bosses warn Amazon will be forced to take its expansion slowly as it faces barriers of cost and distance in the Australian market, Mortimer believes the retailer has always banked on taking a slow approach anyway.
“I suspect that they may have a very slow-stage market rollout. Their aim is not first for profit, but to generate market share,” he says.
“I think if the expectation is Amazon will come and we will be able to order from 100,000 [products] online and have them in two days straight away, people will find that is not the case.”
Demolition or opportunity?
While the bigger end of town is preparing to launch a war against the retail giant, several SMEs have told SmartCompany they’re not scared of Amazon’s arrival.
Last week, smaller retailers said they see the move as an “exciting opportunity” that presents new options for distribution, as well as powering online retail forward.
“[It’s] a true convergence of the online with the physical, and a quantum leap forward in customer experience,” founder of online wedding wear supplier Bridesmaids Only, Talia Sasson, said on Friday.
“We will continue to invest in our customers. If necessary, we are lean enough to pivot if any decisions taken by conglomerates like Amazon seek enter our marketplace.”
Co-founder and director of bookseller The Nile, Jethro Marks, agrees, saying the major effect of the retailer’s launch in Australia would be in pushing other businesses towards better service.
“The arrival of Amazon is going to force all retailers to focus more intently on customer needs and wants,” he said.
SmartCompany contacted Gerry Harvey but he was unavailable for comment prior to publication.