THE traditional bricks and mortar retail industry has been significantly impacted by consumers shifting to online shopping.
With global e-Commerce sales growing strongly year on year, there are ever increasing store closures worldwide, particularly within homewares, electronics and department stores.
Amazon has been a key disrupter in the online distribution market and has already made a significant impact in the US and UK.
Amazon continues to grow at faster rates than its physical and online retail competitors, helped by high customer loyalty, brand awareness, lower prices and speedy delivery. Amazon has also been helped by its Amazon Prime subscription service.
Amazon is anticipated to commence operations in Australia later this year and appears to have big ambitions for Australia's $300 billion retail sector.
It has already lodged more than 250 local trademark applications including applications associated with its “AmazonBasics” brand, the company’s private label product range that launched in 2009 in the US.
AmazonBasics sells home brand versions of over 1,200 products across 28 departments. AmazonBasics has been relatively successful and for example, now accounts for about one-third of online battery sales in the US, outselling major brands such as Duracell.
More recently Amazon has entered the food retailing business with its Amazon Go supermarket business and it has also been expanding into selling bulkier items such as furniture and whitegoods.
Over the longer term, the arrival of Amazon in Australia poses a significant threat for a range of domestic retailers and shopping centre owners.
Those businesses most at risk include Kmart, Aldi, Big W, Supercheap Auto, Rebel and Amart Sports, Target and Kogan, which will be significantly impacted as “value-seeking” consumers shop around.
Former Wesfarmers chief executive Richard Goyder, warned last year that Amazon will "eat all our breakfasts, lunches and dinners" unless Australian retailers become more innovative and competitive.
Over the next few years, as Amazon attempts to establish the same consumer loyalty and distribution network in Australia as in the United States, local retailers and shopping centre owners will have the opportunity to try to improve the physical shopping experience to make it more enticing to foot-traffic, to drive on-line purchases towards in-store collection and returns (which leads to higher net sales compared with on-line only) and to enhance on-line offerings to provide more rapid deliveries.
- Christopher Hindmarsh is an adviser at JBWere Limited which is owned by NAB. Email christopher.hindmarsh@jbwere.com or contact (02) 9325 2639. This article contains general advice only. In preparing it JBWere didn't take into account the investment objectives, financial situation and needs of any particular person. Readers should assess if the information is appropriate for their circumstances, or contact a licensed financial adviser.
