The noise around Amazon’s entry into the Australian market is deafening. The media, retail commentators, retail analysts and consultants have been talking about the apparently apocalyptic moment for Australian retail for some years.
It is not that at all. More likely it is “huff, but no puff”.
First, let me start by saying I am a fan of Jeff Bezos, and dedicated my book, “Africa to the ASX” to him.
Amazon has had for some years a strong presence in Australia, via its inbound sales shipped from offshore and its fast-growing AWS business. However, it’s business model is often misunderstood and it is important to appreciate the difference between its marketplace business and its full-service solution including Amazon Prime, Amazon Fresh, and Amazon Go.
Based on what we have seen so far it is clear that Amazon’s marketplace business is making moves to open in Australia, soon, however, it does not look like we can expect a full-service solution in Australia anytime soon, despite the claims from Amazon and the reporting in the media. Or to put it another way, it’s rubbish.
What we know is that Amazon has (apparently) leased a 20 000 SMQ facility in Melbourne. If this is true, it is a pretty flaccid start to a full-service solution. Our larger ecommerce businesses like Catch, Kogan, Ozsale, have larger facilities and our established retailers would see a 20 000 sqm site as a proverbial pimple on a camel’s butt.
Speaking of butts, Amazon had their’s kicked in China via their JoJo partnership and fled, so suggestions that success is a foregone conclusion are wrong. Consider these;
- The acquisition of Whole Foods in the US has amplified their cultural divide. Whole Foods has been seen as one of the best places to work in the US, with a progressive and nurturing culture. Amazon, increasingly being outed as one of the worst places to work, especially for blue collar workers, with Bezos’s compulsively competitive nature manifesting in an almost paranoid secrecy. (As we have seen in Australia and its deafening silence).
- Amazon is making progress in India, but so did Napoleon before picking one fight too many.
- The companies phone offer failed, as did their online auction strategies.
- They have been playing the same ‘ bluff’ game in Brazil for years, sending retailers and the media in a frenzy there. All huff, no puff.
- They have hired Rocco Braeuniger from Germany as their country manager. Not sure if this guy has driven from Sydney to Perth yet, but I hope that is in his induction training manual.
All the noise about the imminent launch started well over two years ago, and since then they seem to have made little progress. Very little progress. Costco had someone on the ground for five years before they launched their first store, Amazon might better that record.
Nor will they find the competitive landscape as simple as some suggest.
The Catch Group’s Marketplace, privately owned and funded, and but a few months old, has more sellers on it than Amazon has claimed it has, recently. It’s not the big eating the small, it’s the fast eating the slow, in this space.
It has entrenched global digital competitors to contend with. eBay Australia has had this market to themselves for 16 years.
Amazon, is a twenty-three year overnight success, and Bezos is to be commended for harnessing limitless amounts of capital, and building out some powerful adjacencies. His US and European forays in retail are of course outstanding.
But a number of his retail forays have predictably been flops, and if I was a betting man, I would say that they will either fail in Australia or it will be a slow grind. A very slow grind. If their current momentum versus the hype is an indication of things to come, they make the NBN look like Cathy Freeman!
Don’t get me wrong, I am a big fan of marketplaces, but I am betting, domestically, on a revitalized eBay Australia under the leadership of Tim MacKinnon and the agility of the founders and leaders of the Catch Group to build a powerful curated merchant centric marketplace wrapped around their core hot lava offer.
Also, you should expect to see the growth of smaller niche marketplaces like The Nile, MyDeal and Klika. Our leading brands like The Iconic and Myer are moving into the marketplace space too. Amazon and Alibaba will continue to provide outstanding springboards to global customers. Alibaba to China, Amazon to the US and Europe. Valuable conduits outbound for our brand owners and retailers with a global focus, but domestically, another story. A fizzer.
Now, some might consider this post a bit more robust than I am known for. Someone had to say that the “Emperor has no clothes” and I am sorry it had to be me. But silence as always implies consent.
Many global brands have arrived in Australia, have done well, and are participating in the retail ecosystem in some way, whilst competing hard. Retail is a deeply social endeavor, with good retailers well connected to the customers they serve and the ecosystems in which they dwell. Amazon’s early approach reflects the opposite.