While there’s been a heap of talk about Amazon coming to Australia and shaking up the local retail environment I’ve set to questioning what this might mean for me and my fellow small business stockists?
Is it Doom and Gloom or Opportunity?
Will it mean we lose our businesses? Is it all doom and gloom? Or is there opportunity in change? All the conversations on radio and tv about Amazon is from the point of view of the consumer and the big retailers, hardly anything about the majority of us small business owners.
So I went over to Amazon USA and had a look around their product selections. And yes, there is a lot of main stream products that the big retailers carry and that’s freely available at trade shows anywhere in the world. There is price competition for these mass market products.
Well Curated Original Designs vs Mass Produced Everywhere Products
There isn’t a lot of the original, local, handmade or quirky products. So shops that are carefully curated with well selected designs from local makers and designers don’t have much to worry about from Amazon.
It seems to me that the shops who will be facing competition over the next few years will be the ones relying fully on carrying what you find everywhere else, the mass produced Chinese manufactured products because that’s what is all over Amazon.
Customer Service Point of Difference
While Myers and co keep reducing customer service staff numbers and frustrating customers, Amazon is saying it can do really fast and free delivery on the very same products, and often at cheaper prices.
But when it comes to actually calling or emailing Amazon the customer service levels fluctuate significantly – from great to dismal.
So if a local shop has a great mixture of locally made, original pieces that are well curated with great customer service it will be in a different category to Amazon and the Myers cohort.
How is doing Amazon Doing Free and Fast Delivery?
Originally I found it staggering that Amazon can do free and fast delivery, especially as I have to deal with Australia Post and local couriers and know what their pricing is like.
But then I started piecing it together, Amazon itself isn’t about making profit, it’s about market share. So it seems happy enough to lose money on shipping. Really? Surely not. That would be daft.
Are they treating shipping as a loss leader and having it covered by other revenues? Now that made more sense.
So how are they doing the fast deliveries? It turns out they’re not only using couriers but also uber drivers (!!). So it really is a loss leader!
For many of us independent small businesses we can really only afford to do free shipping once our retail orders are over a certain value, spreading the hit over multiple products. And maybe customers can accept that, seeing the difference between Goliaths like Amazon and local independent retailers? I hope so.
Amazon Warehouses are Centralise Distribution Points Saving them Money
I think the true meaning of Amazon coming to Australia is in them setting up their own warehouses in major Australian cities from where they send out products.
But who’s product are they sending out? Theirs? No, it’s other small businesses and their products. As an Amazon seller you can either send out products yourself for individual orders or send your products in bulk to the Amazon warehouses and have them ship them out to customers.
Now this is something I’m investigating further as sound interesting. What are the costs involved in warehousing and shipping for the Amazon seller? What’s involved in listing on Amazon? Where’s the money for the seller and Amazon?
My initial explorations seem to be showing me that Amazon can cover the loss leader of free and fast shipping because of the advertising and listing fees sellers pay them. That’s where the money is for Amazon. Every business needs to have money.
Does Amazon in Australia Mean All Amazon Products are Available in Australia?
When I was looking at the different products being sold by the various Amazon sellers on the USA site I found that most didn’t ship to Australia, especially the bulkier ones.
It took a while but I finally figured out that Amazon sellers can choose which regions around the world they ship to by which warehouses they choose to send their stock to for distribution.
So the USA has several warehouses so they can do the fast and free deliveries. So if your selling in the USA and shipping from their distribution warehouses you need to send stock to EVERY warehouse.
If you are based in Chicago as an Amazon Seller and want to sell to European customers then you also need to ship your stock to the Amazon warehouses in Europe. And pay for that shipping yourself.
The same applies to Australia. Any of the American Amazon sellers wanting to sell into Australia will need to ship their product to the Australian warehouses. And pay for the shipping.
I think one of the reasons Amazon hasn’t taken off so much in Canada, UK and Europe is this requirement to ship bulk stock to their warehouses – the cost and the American isolationist point of view.
This could mean that Amazon will have a growing presence here and they may have learnt some great lessons from their previous international expansions, but it could also mean our experience of Amazon could be more similar to that of our Canadian friends that what’s happened in the USA.
The more I look and learn about Amazon the more I think there’s opportunity for Australian small businesses – wholesalers and retailers by leveraging off the Amazon distribution and marketing channels – just think of all the free advertising all streams of the media are constantly giving Amazon and this will continue for years.
I think the big boys like Myers and David Jones may well have something to be concerned about because of customer service issues combining with product availability, shipping and pricing.
The strength us small businesses have is in our customer relationships and our ability to curate really interesting and original products. Sure, most retailers need some of the mass produced products that meet some customers’ expectations but what sets our individual stores apart is how we bring together interesting and different products and how we nurture our relationships.
So look to your staff, make sure they are representing your business in the best possible manner with grace and good humour. Look to what you’re curating and what percentage of original local designs are mixed with the mass produced, get-anywhere products. It’s that blend that makes each shop different.
Amazon could be a great thing for us small businesses. Finding out how this can work is my next task. Time to learn from those already doing it.
Tell Us What You Think?
What do you think will be the impact of Amazon in Australia?