Retail

Dick Smith: Don’t be mistaken, Amazon will “slowly strangle” and “destroy” Aussie retailers

Emma Koehn /

Dick Smith

Source: AAP/Lukas Coch

Prominent Australian businessman Dick Smith says those underwhelmed by the launch of Amazon Australia yesterday don’t understand the power of the global retailer, predicting it will ultimately “slowly strangle” Australian businesses that are powerless to stop it.

“I know it will be immensely successful,” Smith tells SmartCompany on Amazon’s presence in Australia.

Amazon officially launched in Australia on Tuesday morning, after months of speculation and analysis. But almost immediately, shoppers began taking to social media to question the prices on offer.

Many consumers, it appears, expected Amazon’s offering to be cheaper than Australian retailers across the board.

However, Smith believes the “extreme capitalism” which has always been on display from Amazon — from its laser focus on maximising profit, to the way it has minimised the number of staff required to deliver products — means the only long-term outcome for the company in Australia is success at the expense of retail incumbents.

“They are incredibly cunning, the greed is unlimited, and they are in control of everything they are doing,” Smith observes.

He warns retail stalwarts watching the rollout of Amazon Down Under should not be lulled into a false sense of security by customers appearing to be underwhelmed by the initial product offering.

The company is playing a long game, he says, and the ultimate effect will be lost jobs.

They are going to slowly strangle the big businesses and destroy them. Typical Australian workers will be affected,” Smith says. 

While Amazon’s business model is “brilliant”, Smith says Australians have to understand that the company acts to serve the interests of maximising products from shareholders. He believes that focus on profit represents “self-destruct capitalism”, and while Amazon Australia country manager Rocco Braeuniger has pledged to bring “thousands” of jobs to Australia, many local jobs will be lost as local retailers shut up shop.

“When you click to buy something from Amazon, say every 100,000 items sold is another Australian job gone. Well, something doesn’t pop up when you buy saying, ‘Haha! Another Australian job gone!”

When asked about the future of the local retail sector, Smith believes there is actually little that smaller retailers can do to get ahead of Amazon in the longer term.

Taking a view well beyond the initial launch of the business, he says Amazon will change the landscape of Australian business not because of a new idea, but because of an aggressive strategy that prioritises efficiency and profit over job creation.

While punters may be complaining about price points initially, Smith believes that, based on Amazon’s pricing strategies elsewhere, eventually its model will match consumer’s price desires here too.

“It’s not as if they’ve invented some fantastic new product,” he says.

“But I do think it’s an incredibly successful formula.”

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Emma Koehn

Emma Koehn is SmartCompany's senior journalist.

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  • Relieved Ex Employer

    Dick is spot on and these so called “cool” companies like Amazon and Apple don’t pay any tax
    Yet the Australian public hate the banks who pay about $10 billion in tax and much of the rest goes into Aussie sips funds
    Go figure

    • Rohan Baker

      According to the testimony of the Apple Australia CEO at the Senate tax enquiry last year, Apple turned over about $8 billion in revenue, collected $800 million in GST, made a net profit of around $270 million and paid $81 million in company tax in the 2015-16 FY. So for their efforts they raised $881 million. So lets say their payroll runs at 20% – therefore with PAYE tax payments from their employees wages/salaries averaging 25%, add another 40 million due to Apples Australian activities. So about $921 million of the ~$460 billion raised in federal taxes. That’s hardly paying no tax.

      • George Darroch

        If you believe they only make a 3% profit margin in Australia I have a bridge to sell you. Their profit shifting through transfer pricing to tax havens like Singapore and Ireland ensures that.

        The GST is paid by consumers, not the company.

        • BadScience

          If the tax system is doing its job properly, then ALL taxes are paid (directly + indirectly) by consumers to the government.
          If you don’t like it, stop being a consumer.
          Problem solved …

  • Rohan Baker

    The hide of Smith is amazing. This is the bloke that amassed a fortune by starting a business selling cheap foreign made electronics at inflated prices. All local manufacturers couldn’t compete and subsequently closed down. Panasonic, Pioneer all had local factories here that were killed off by DSE.

    Just once I would like this hypocrite to look into the mirror.

  • Ed Shyed

    If their launch at present is anything to go by, I dont think so Dick.

    For instance, most online retailers in Aus have for a long time sold, lets say, the UBNT Edgerouter Lite 3, a SMB class router, which is still affordable for home users with NBN, most of them sell this item for around 150 give or take a few dollars, the Amazon AU price for this exact item is 203, yes two hundred and three dollars and a few cents, thats not a bargain, it is a criminal rip off. and I just hope that anyone looking for items on amazon AU also, search for other existing online retailers.

    • TonyMelbourne

      A very narrow minded response, Ed, the platform and infrastructure is now in place, now Amazon will optimise their offering to the nth degree, those prices will drop through the floor, and dynamically update using AI, not someone employed to “price check” and update… Retailers have done nothing about being truly customer-focussed, now is the time, but they wont, so they must prepare to fail. Service Design is the answer, but sadly most Australian retailers wouldn’t even know what that practice meant.

  • Michael Ratner

    Enough with the hyped up panic. Amazon deserve respect for their bottomless pockets and paranoid desire to conquer the world.
    The subliminal here is that if this succeeds like some people are suggesting, could we assume that this is the end of retail as we once knew it.
    There are more players to this that have to get on board and change the status quo.
    The apocalyptic thought of empty shopping malls and retail strips is already evident and the future expansion of retail malls begs the question … Who is going to Fill The Space.
    Are we assuming that people will just stop retail shopping and if so is the reason: Cheaper Elsewhere; Not enough time; too much solar power which means we can keep our homes air conditioned all the time so no need to look for cool.
    If we all lie down and die we know what the result will be, but there has to be cumulative thinking not the odd man out retailers who really do the right thing in retail as opposed to the tenant that opens up their shop and has a right of doing business because they are paying huge rent. It’s not a privilege. So don’t invest in retail shopping space be it strip or centers unless you realise the returns will drop.
    Most of retail is impulse buy and we would all like to take it home with us. If it’s whitegoods we can’t do that but we are miles better off having a point of contact and reference if we do.
    Are Amazon that clever that they will be able to fill the silly holy grail of customer service. ” EXCEED CUSTOMERS EXPECTATIONS.”
    That’s academic talk which in theory is correct but as customers we are harassed to have these expectations without thinking of the logistics and walking in the sellers shoes.
    PAY ATTENTION HERE……. This is the greatest opportunity in living memory for retailers to discard their terminal apathy or get themselves out of the rut and just start doling this better always knowing that the spending public now have options.
    Read between the Amazon lines and don’t take everything at face value such as Free Delivery (Not true there are conditions), turn around times (are you kidding me) and everyone is fixated with the price.
    Sure it does make a difference but if you take into account the time spent looking for the best deal, anxiously waiting for the parcel to arrive, hoping like hell it’s right because getting it changed is a nightmare – then I appeal to retailers…. stop and think – . YOU KNOW WHAT YOU HAVE TO BEAT…… and landlords get your pencils out and start sharpening.

  • Retail & hospitality need to innovate. This is a kick in the bum we all need

    • BadScience

      Don’t know what you mean by “innovate” – any suggestions?

      • Peter McGuiness

        It means look at where they are doing it better around the world at match that service and stop delivering at the status quo

        • BadScience

          Fair enough, Peter – at least you made an attempt to define “innovate”, which I invited the OP to do.
          And we waste a lot of resources running around kicking each other in the bum.
          I’d argue copying other people is not innovation, but then … we have a LOT to learn in Australia, so at least you suggest a starting point. Cheers.

  • Michael

    Irrespective of all the hyperbole surrounding the Amazon launch there is one fundamental truth Jeff Bezos states that he wants to provide customers with the lowest prices. The lowest price is not always the best price for the community. It is unhealthy if the best price is at the expense of diversity and small businesses. Let’s not forget the woeful manufacturing sector we now have. We all wanted the new shiny bobble at a cheap price. Now we hardly produce anything ourselves and most of our manufacturing knowhow is lost forever. Eventually we will all be like hamsters on the Amazon and co treadmill. Sometimes cheap costs too much.

  • Lucas Smith

    They’ll only be destroyed if they fail to cope up with the competition. That’s what running a business is all about. Recognising the competition and then taking steps to make sure that your business don’t get swallowed up by the other.

    • BadScience

      That’s not the strategy Steve Jobs used to make Apple the largest company in the world.
      Keep looking over your shoulder and you’ll find yourself running into things.

  • DIYfamily

    The shopping malls aren’t empty because of Amazon. They are empty because hundreds of thousands of working Australians are unemployed and underemployed and most of those who have jobs are up to their eyeballs in debt and living from week to week. Furthermore, those who do have jobs are working harder than ever for half the amount they used to get ten years ago. Put simply, the majority of Australians don’t have the money to spend on anything but essentials. Government regulations and red tape have been strangling the life out people for years. And until the price of housing, land, electricity and fuel go down,, both the online and B & M retails sector is going to be quiet