Metcash ‘top of the list’ for Amazon

Metcash-buildingWholesaler and distributor, Metcash, ‘remains at the top of a list’ internally recommended to Amazon by one of its former employees, to help accelerate the e-commerce giant’s ability to operate effectively in Australia.

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Speaking to IRW, Brittain Ladd, who led the global expansion of AmazonFresh at Amazon until February of this year, said he made the recommendation after analysing Australia’s retail landscape. Based on his analysis for Amazon’s supply chain, logistics, transportation and last mile requirements to cost-effectively meet customer demand, he recommended “that Amazon make an acquisition of a company with the required distribution and logistics capabilities; Metcash remains at the top of the list”.

Ladd said he held discussions with Metcash executives on the topic of Amazon, but did so from the context of his 2012 paper, A beautiful way to save woolworths and as a consultant, and not on behalf of Amazon.

Pointing to the acquisition of Whole Foods by Amazon, Ladd said the move proves that Amazon has evolved as a pure play e-commerce retailer into a company that recognises the value of physical stores.

“With physical stores and e-commerce, however, comes a need for a much more established physical distribution network,” which lead to Ladd asserting he had identified significant operational and leadership challenges at major Aussie distribution companies.

“Australia Post and Toll Group continue to make the necessary investments to improve their abilities to meet the needs of companies such as Amazon,” he said

“If I was the CEO of either company, my focus would be on increasing services to meet the growing demand for e-commerce services such as last mile delivery as well as providing end-to-end logistics services for physical retailers. I have evaluated both companies and I identified opportunities for improving performance. In addition, I believe more experienced leadership would prove beneficial in several key executive roles.”

Australia Post ‘already speaking’ with Amazon

Speaking to IRW, Ben Franzi, Australia Post general manager of e-commerce and international, said the distribution firm is already building strategic partnerships with a range of leading and emerging e-commerce companies locally and abroad, including Amazon, to support online retail trade and meet customers needs.

“We operate in an extremely competitive industry,” he said. “With the growth of online shopping, customers expect great value, choice, convenience and service from every provider in the market.

“Innovation is at the forefront of our transformation into a leading e-commerce business and we’re always looking for new opportunities to accelerate e-commerce innovation across Australia. We will continue to consider and identify partnerships that come with a compelling offer to strengthen and complement our e-commerce and delivery solutions.”

Franzi also said no other logistics or delivery company can lay claim to the same reach as its national last-mile delivery network, which is serviced by a fleet of over 11,000 vehicles and retail network of over 4000 post offices.

IRW was directed by Metcash to previous comments made by its outgoing chief executive officer, Ian Morrice, who previously said that the company, which is the operator of IGA supermarkets and the Mitre 10 hardware chain, “would consider any opportunities that might emerge, including working with new entrants”, when asked about a tie-up with Amazon late last year.

“But it’s important to add the context to my answer here — we would take into account the medium to long-term impacts of those decisions on our independent network. Successful independents are our core purpose and we don’t see that changing,” he said.

Metcash supplies over 10,000 independent retailers and over 90,000 wholesale customers across the food, grocery, liquor and hardware industries. Its retail brands include IGA, Mitre 10 and Cellarbrations.

Investment firms up their Metcash ante

Meanwhile, on Friday last week, financial services firm, JP Morgan – which recently slashed profit forecasts for Myer and JB Hi fi due to the ‘Amazon effect’ – became a substantial holder in Metcash, confirmed via an ASX announcement.  This announcement was preceded by Macquarie Group Investments, which also became a substantial holder earlier in the week. Neither company could be reached for comment on what spurred the stock activity.

Amazon could not be reached for comment, but has previously noted that Ladd’s comments do not reflect its own views.

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