Former employee: Amazon to expand cautiously
Speaking to an audience of retail executives at a breakfast hosted by his new employer Ernst & Young (EY) in Sydney on Tuesday, Ladd warned retailers not to judge Amazon within a year, but rather over the course of a decade as the company undertakes a period of learning before accelerating its plans.
“The discussions I had internally and the discussions I’ve had since I’ve left, really indicate to me that Amazon is going to start with a very basic model in terms of staging,” he told leaders from Nick Scali, JB Hi-Fi, Toys’R’US and Steinhoff, among others.
“They’re leasing warehouses, but they’ll also leverage delivery stations [that] the warehouses feed, and it’s from those stations that last mile delivery occurs.”
Amazon confirmed earlier today that it has inked a lease on a distribution centre in Dandenong South, Melbourne, and has begun hiring for a range of roles that will see “hundreds of jobs” created.
“I don’t envisage any major announcements out of the gate,” Ladd said. “They’ll get a basic foundation in place and then begin to leverage Prime.”
Ladd, who left Amazon in March before landing a senior advisory role at EY, was one of the architects behind Amazon Fresh, having advised the company to purchase Whole Foods several years ago.
He expects Amazon to be operational in Australia be the end of 2018, a prediction viewed by UBS as a best-case scenario.
UBS analysts, who have recently released a 110-page report on Amazon’s impact, believe that job applications, local supplier engagement and the progress of leasing negotiations suggest that Amazon could begin Australian fulfilment by the end of 2017, feeding speculation about a Q4 launch.
UBS concurs with Ladd’s slow-burn theory, predicting that the giant will capture only two per cent of retail sales within five years of entry.
However, they forecast that Amazon’s sales will skyrocket from $400 million to around $3.5 billion by 2023, impacting margins by up to 200 basis points and constraining earnings of major retail brands such as JB-Hi-Fi, Myer and Super Retail Group by up to 20 per cent.
Ladd believes those companies who try to compete with Amazon will need to go all-in and ensure they are genuinely offering customers something that Amazon can’t, whether that’s product, loyalty or service.
But he also said that Amazon is also an opportunity for retail brands to sell products on its marketplace or use the giant for fulfilment, store replenishment and last mile delivery.
Inside Retail has spoken to multiple large retailers in the last fortnight who have indicated their interest bringing their products to Amazon marketplace.
Temple & Webster CEO Mark Coulter said he’ll “probably” partner with Amazon in a panel discussion last week, while Styletread founder Mirella Sago indicated interest.
Adairs CEO Mark Ronan is reviewing the possibility of bringing his company’s range of high-end Manchester to Amazon’s platform, as revealed by Inside Retail last month.
Amazon itself has begun discussions with suppliers, with former Appliances Online head of buying Fabio Bertola having been brought on to oversee the rollout of marketplace.
Damian Hill, CEO of REST Industry Super, said that Amazon won’t destroy retail, but that retailers need to do their due diligence and make changes now, rather than later.
“Retail has to work on the assumption that Amazon is in your category and competing heavily against you, even if they aren’t today,” he said.
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