Sunday, 20 November 2016

How Amazon Plans To Disrupt Australian Retailing.

There is much speculation about Amazon's entry to the Australian market and the possibilities will have significant impact on Australian retailers including public markets.

Amazon is famous for its huge share in the online retail market and more recently they have engaged in bricks'n'mortar expansion.

The Age this week examined a store model for the Australian super market industry that could see Amazon smaller format stores, similar to Aldi, that stock a selection of items that customers want to physically examine like fruit, vegetables, meat & fish. Other staple items like dry and canned foods would be ordered from a touchscreen or app. 

The technology could be something like what is shown in this photo below. This is a recent innovation in Finland where grocery items can be purchased from a giant screen at a bus stop.

It is suggested that Amazon would operate regional warehouses to handle the remotely ordered goods and given their fast delivery expertise (one hour delivery in some places) customers could even have their dry goods on the doorstep by the time they arrived home from shopping.

There are significant cost benefits for smaller store operators in rent and staffing expenses so the profit ratios for Amazon look very attractive.

And smaller doesn't necessarily mean less choice. Amazon Fresh, the online grocery service in the US has 500,000 products versus tens of thousands in traditional super markets and less than 1500 at Aldi.

Amazons penetration into the Australian market won't all happen at once although given the lead time needed to prepare for this sort of competition, and the pace of expansion already seen in other countries, it is likely that Australian retailers will hardly have time to blink.