Amazon’s impact on Australian retail
In a report released this week, it was revealed what Aussies searched for and bought on Amazon’s US site in March of this year – Kindles, books, toys, personal computers and electronics topped the list of popular categories.
Speaking to IRW, Hitwise general manager for APAC Harley Giles said retailers in the technology sector should take this as fair warning.
“If you make the assumption that Amazon will have the same proposition in Australia as it has in the US, you can see which industries will be most affected by Amazon’s business in the Australian marketplace,” Giles said.
Australian consumers are already one step ahead, with many comparing products from local consumer electronics websites with products on Amazon’s US site, according to the Hitwise data.
The report shows that over 50 per cent of people who visit Harvey Norman, JB Hi-Fi or Kogan are also visiting Amazon in the US. However, competition among the three brands locally is relatively low, with only 24 per cent of people visiting JB Hi-Fi also browsing Kogan.
Investment bank Citigroup recently cut its long-range earnings forecasts for JB Hi-Fi and Harvey Norman by more than 40 per cent and 30 per cent, respectively, due to the pricing pressure it expects Amazon to exert in this space.
Meanwhile, Australians are much less interested in homewares and beauty products than shoppers in the US and UK, where those categories rank among the most popular. But Giles warned retailers against reading too much into that.
“The reason we’re not seeing the same degree of popularity for home and beauty products as we are for electronics is due to the restricted ability to ship those products to Australia [from Amazon’s US site],” he said.
“We envision that will change once Amazon is distributing locally.”
Amazon will work ‘tirelessly’ to delight
According to former Amazon employee Brittain Ladd, who led the expansion of AmazonFresh globally, the Hitwise data reflects the way consumer behaviour on Amazon changes over time.
“What’s interesting about Amazon is that once consumers realise how many products are available […] and how great the experience is, consumer behaviour changes and they gravitate more and more to Amazon,” he told IRW.
“Amazon has effectively created an ‘endless aisle’, which means that regardless of where a consumer is located, they will most assuredly find a product on Amazon that they will want to buy.”
But while consumers broadly speaking buy a greater variety of products from Amazon as they become more familiar with the site, the idiosyncrasies of each region still determine the success of each offering.
For instance, while grocery items are the fifth-most purchased category on Amazon in the US, they rank much further down in the UK, where it is ranked tenth. Ladd said this comes down to the density of bricks-and-mortar supermarkets in each country.
“Due to the density of grocery stores in the UK and the ease of finding and buying groceries, consumers don’t see the value of ordering groceries online.
“In the US, consumers are looking for convenience, and more consumers are willing to order groceries online to eliminate having to drive to a grocery store,” he said.
Ladd went on to predict the eventual success of Amazon’s grocery offering in Australia:
“Because Coles and Woolworths failed to invest in online grocery ordering and delivery, Amazon has little in the way of competition.”
Ladd was emphatic that he doesn’t think Amazon is out to ‘destroy’ Australian retail.
“A publication repeated my comment and they tried to make it sound like what I said was negative. I want to defend Jeff Bezos and Amazon,” said Ladd, who now works as a strategic advisor in Brazil.
“Jeff Bezos never talks about destroying any company or market and neither does any other executive at Amazon. Jeff Bezos always says the same thing – focus on the customer.
“I want everyone in Australia to understand that the men and women who work for Amazon have one desire in mind – to delight customers through superior customer service.
“[They] will work tirelessly to delight consumers in Australia.”
Ladd first wrote about Amazon’s arrival in Australia in the 2013 article, A Beautiful Way to Save Woolworths, which has been referenced in The New York Times, The Wall Street Journal, The Financial Times and other major publications. The article explains how Woolworths could apply game theory to lead the grocery market Down Under.
Amazon previously noted that his comments do not reflect its own views. Ladd left the company in February and was never involved in its plans for the Australian market, the e-commerce company said.
“Our focus is on providing the best shopping experience we can for customers all over Australia,” Amazon stated.
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