It's not a stretch to say Amazon's arrival in Australia – doors open in September – is one of the biggest things to happen to local retailing. Executives have been quoted stating it plans to "destroy the retail environment in Australia".
Its intentions to shake up supermarkets, streamline logistics operations and, presumably, propensity to buy market share by undercutting the incumbents gives it a real advantage in an already competitive market.
But what does all this mean for smaller businesses? According to Pascale Helyar-Moray, founder of online business StyleRocks, which sells customisable jewellery, if you sell commoditised products like socks, jocks and handkerchiefs, you may be in big trouble.
"Any business that sells a product that is easy to buy online should be very, very worried, Amazon has its logistics down like nobody else, because of its clout and size. It can leverage that to smooth out distribution process and get really good rates," she explains.
From the consumer's perspective, says Helyar-Moray, if you have to spent $40 on a toaster from a local business, plus $15 for shipping and you can buy the same thing from Amazon for $19.95, there is no choice but to go with Amazon.
Of course, the question is whether Amazon can sustain any loss-leader approach long term in Australia. This is a very different market to the US. We have a population of 23 million versus 324 million in the US. So the same economies of scale in Australia are not possible. Labour costs are also much higher than in the US, which will impact on its margin down here.
For instance, according to the US Bureau of Labor Statistics' latest figures, hourly compensation costs in the manufacturing sector in Australia are $US47.68, whereas the comparable figure for the US is $US35.67.
Nevertheless, as Helyar-Moray notes, other global behemoths like grocery business Aldi have successfully translated their business models for the Australian market without any real change. "So maybe it will be the same thing with Amazon," she says.
Nevertheless there are many steps Aussie small businesses can take to protect their operations from the threat of Amazon.
"Differentiate your product," Helyar-Moray says. Make it something Amazon can't offer – or innovate. Come up with a completely different product in a space in which they cannot compete because of their business model."
There are many different products in this category, for instance custom and highly specialised products.
"Another approach is to find a different audience. If you're fighting for the attention of somebody who wants to spend $40 on a toaster, my guess is they're not going to be very loyal. So there's not going to be an online relationship with them," Helyar-Moray explains.
"So, find a different audience. Find somebody who does appreciate the custom service and bespoke nature of your product," she adds.
It's also worth noting there are ways small businesses can benefit from Amazon's experience. Its spin-off, Amazon Web Services (AWS), has a host of services it has developed in its own business that it now offers to other businesses, using what it has learned from being an online pioneer to develop these tools. These include data analytics, data storage and app development, among many others.
Adam Beavis, Amazon Web Services' head of commercial sales in Australia and New Zealand says this year he expects many small and medium-sized business (SMB) customers to use more cloud-based services.
"In 2017 we expect to see more SMB customers using AWS for [important business technology]."
He says early adopter small businesses are likely to explore new services such as serverless computing (which just means someone else manages your servers), the Internet of Things (which involves connecting inanimate objects to the internet) and natural language processing services (which involves using computers to analyse human language).
It all sounds very out there, but no doubt in a few years these technologies will be common.
Given the rapid pace of technological change, and the increasingly competitive operating environment, it's likely 2017 will be a very busy year for small business.
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