Amazon Won’t Kill Aussie Retailers but Fast-Moving Evolution Might
Shoppers are growing so accustomed to the ease of buying online that bricks and mortar stores struggle to satisfy them anymore, Intel’s global head of retail has warned Australian traders.
Jon Stine said he visited Australia recently and thought talk that Amazon’s arrival on its shores in November would cause a “retail Armageddon” was “nonsense”.
Rather, the sector globally was entering a period of “accelerated Darwinian evolution” in which businesses could either change or perish, he told a group of Australian retail managers in New York City on Sunday, ahead of the National Retailers Federation’s annual expo.
Survival required retailers with bricks and mortar stores to recognise customers’ expectations had been dramatically altered by online shopping, where they could easily learn about products, know what was available and make payments with a single click.
“A normative expectation for shopping is no longer the store – the normative expectation for shopping is the internet,” he said.
“The normative benchmark for retailing is Amazon.”
Not having customer details saved on file, or knowing if a product is available at another store or in a different size or style were things customers did not experience online and so would not tolerate in stores.
“The younger and the more digital the shopper, the greater the expectation that the world will be like the internet, as opposed to the internet being like the world,” Mr Stine said.
With more and more products being commoditised, merchandise was becoming less important and service was becoming more so and the ability to gain customer loyalty was becoming the most crucial element to a retailers’ success, he said.
That was something that the Amazon Prime subscription service, which 59 per cent of American households have signed up to, excelled at.
“Amazon Prime is the killer app – it allows easy shopping, friction free payment, payment in a click”, Mr Stine said.
“That is winning adherence at a rate far more than any merchandising innovation at any other retailer.”
Amazon has said it expects to launch Prime shipping benefits in Australia in mid-2018.
About 5.5 per cent of total Australian retail sales in November were online according to the Australian Bureau of Statistics, compared to about 10 per cent in the United States, 19 per cent in the UK and 24 per cent in China.
But Mr Stine said a better metric to assess the impact of online retail is how many customers started their journeys with a digital search, which was up around 80 per cent in advanced online trading nations such as the UK and China.
“They go to Google and Amazon first – that’s the filter, that’s the gauntlet. If you get through that filter and gauntlet, maybe they show up at your brand and then they move through the shopping journey,” he said.
“That is in front of you with Amazon in Australia.”
Holiday sales in the US jumped 5.5 per cent in 2017, while Australian retail sales jumped a shock 1.2 per cent in November, mostly attributed to the new iPhoneX and retailers offering Black Friday sales.
The reporter travelled to New York as a guest of Microsoft.