Retail

Will Amazon be here before Christmas? Why SMEs need to be wary about 2018

Emma Koehn /

Online sales across the country slowed last month, which could be worrying news for SMEs amid predictions that retail behemoth Amazon will be operating in Australia by Christmas.

Fairfax reports retail analysts at Citi Group are predicting Amazon’s local operations will be up and running within the next 60 days, allowing the online retailer to make its first tilt at capturing Australian shoppers before the Boxing Day sales even hit.

The predictions are the retailer will get started slowly, opening up a limited range initially. However, warnings lie in the way the retailer is expected to build up to a triple threat over a short timeframe.

“Amazon will not have a meaningful advantage in two of their three key pillars in the short term (range and delivery, which will evolve over time). As a result, we expect prices to be competitive in order to drive volume,” the Citi analysts said.

The news comes as ABS figures reflect soft retail sales across the country, while NAB’s online retail sales index showed online sales slowed in Australia in July, despite some growth in sectors like fashion and grocery.

Online sales for SMEs have generally been strong when compared to bigger players, but NAB reported the past month has shown a contraction, with sales dropping by 0.1%.

Michael Stapleton, a founder member of the Association of Virtual CFOs, tells SmartCompany the rollout of Amazon’s local operations is unlikely to have a major impact on small businesses this year, but the retailers that are already displaying vulnerabilities in the lead-up to Christmas should be worried.

It’s very close to Christmas now in a retailing sense. Whatever Christmas sales, and sales Amazon does before Christmas, will be on the margin for SME retailers for this year,” Stapleton says. 

If the Australian market sees retailers fall in February and March of 2018, Stapleton says it’s likely Amazon’s impact would only have been the “final straw” for those companies.

However, Stapleton says smaller retailers should be aware that if Amazon’s Australian play does get off the ground this year, by the end of 2018 it will be delivering on two of its biggest strengths: “logistics and price”.

“Next year will really be the big issue,” he says.

Senior research analyst at Euromonitor Hianyang Chan says it’s not just the day-to-day shopping experience that Amazon will be looking to cash in on when it arrives: the company is well versed in how to run shopping events that will no doubt appeal to customers over the long term.

“Consumers in Australia do not shy away from a good deal and these flash sales are highly popular because of the fear of missing out,” Chan says.

This could present an opportunity to smaller operators, provided they work out how to ride that wave.

“We can also possibly expect Amazon to offer a carnival-like experience by involving consumers throughout the event, such as rolling out new technology innovations and games to enhance the customer’s shopping experience. For smaller operators with limited omni-channel capabilities, it is a very big opportunity to take advantage of Amazon’s efficiency in the delivery business by work alongside with this global giant to reach out to a wider consumer base,” Chan says.

Which SMEs are most vulnerable?

In March, Credit Suisse analysts pointed to retail incumbents like Myer and JB Hi-Fi as among those with the most to lose from Amazon’s local launch.

However, at the smaller end of the retail spectrum, small businesses have traditionally outperformed on online sales numbers and many have reported they are far from afraid of the giant’s arrival.

Stapleton says that for bricks-and-mortar retailers, creating customer service that actually leads to sales will be more important than ever.

When people come in, you won’t just say to them, ‘are you happy to browse?’ You try find a way to make a sale, and you don’t let anyone out of your shop without making a sale,” he says. 

Retail expert and associate professor at Queensland University of Technology Gary Mortimer says “speed is becoming the currency of small business and retailers today”.

“Small businesses need to focus on relevant customer experiences [in store]. You really do need to have a plan on how you want to leverage these opportunities,” he says. 

For smaller online-only retailers, however, Stapleton says the path forward is alittle less clear, because these businesses operate on models that directly compete with what Amazon has to offer.

“If you’re doing online retail and it’s fashion, I think the way you use social media will be really essential. You’re providing for the experience that people miss by going in store,” he says.  

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Emma Koehn

Emma Koehn is a former senior journalist at SmartCompany.

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