CBA: Most Australian retailers don’t have a strategy for Amazon

A general view of a Myer store in Melbourne, Australia. (Photo by Scott Barbour/Getty Images)

Australian shoppers are eagerly awaiting Amazon’s entry in Australia but most retailers don’t know what to do about the threat.

The Commonwealth Bank’s latest Retail Insights research suggests almost 70% of people likely to purchase from the online platform.

But most retailers (78%) don’t have a strategy to combat the global retail giant.

“It seems Australian shoppers are ready for Amazon but many of our retailers are still at the drawing board,” Commonwealth Bank National Manager, Retail, Jerry Macey says.

“Although Amazon’s arrival is reportedly weeks, not months, away, it will have a staged entry. So there is time to put plans in place, but that window is closing. There’s still one quarter of retailers concerned about Amazon who not only don’t have a plan, they aren’t working on one.”

In April, Amazon confirmed its plans to bring its retail offering to Australia, promising to take on retailing in Australia with a “vast selection” and “fast delivery”. And last month it confirmed the opening of a massive fulfillment centre near Melbourne.

Amazon’s sophisticated supply chain operations and its discounted pricing, combined with other offerings like its Prime subscription service which offers faster delivery, have wrought havoc on traditional retailers in other countries, most notably the US and Germany.

The Commonwealth’s Retail Insights has also found an unexpected generational split among Australian shoppers.

The older a person is, the more likely they are to be aware of Amazon.

But older shoppers show the least inclination to buy from Amazon. In contrast, younger shoppers are more likely to buy from Amazon, despite having the least awareness of it, as this chart shows:

Source; CBA

“Savvy retailers will be looking to better understand their target market and provide a relevant experience for that group. For instance, younger generations want a more engaging experience in-store to prevent them drifting online,” Macey says.

The Retail Insights report shows almost three quarters (73%) of consumers are comfortable buying Amazon branded-products. A third are likely to subscribe to Amazon Prime for extra benefits, likely to include unlimited free delivery and access to video streaming, for a fee.

“Shoppers are clearly indicating their willingness to buy from Amazon and flagging a high degree of trust in the brand – before it has even arrived in the local market,” Macey says.

Almost nine out of 10 retailers are aware of Amazon’s plans to enter the local market, a rise of 27% over the past six months. Of these, the majority (52%) now perceive Amazon as a threat, up from 47% at the beginning of 2017. The proportion of those considering Amazon’s entry as an opportunity remained flat over the past six months at 13%.

Despite heightened awareness, the number of merchants who saw Amazon as a threat and also have a plan to compete has only grown moderately, from 14 per cent to 25%. A further 50%t of retailers are working on a strategy.

“With so many retailers planning for Amazon’s arrival, we are going to see merchants ramp up activity,” Macey says.

“Those excited about expanding their channels will be learning the ropes of Amazon Marketplace, and those concerned will be considering their overall strategy including products, categories, pricing and distribution. So even if you don’t think Amazon will impact your business directly, you need to be ready for an increase in competitor activity.”

Shoppers said their purchases from Amazon are likely to include books, gaming, music and media (47%) followed by consumer electronics/computers (35%) and household appliances (32%).