The retail giant is making its long-awaited move into Australia, bringing its new brand of instant retail distribution to Down Under. While previously only available with expensive shipping and sales in USD, the average Australian consumer will now have easy access to products from around the world in local currency and a higher level of convenience.
75% of Australians aged over 18 say they are interested in Amazon Australia and 56% are likely to purchase from its Australian site, according to a Nielsen survey conducted last February.
Despite the long notice period, the American retail, dubbed as ‘digital monster’, launches in 2018 — and only 14% of Australian businesses have put any serious thought into competing with the global brand. Investors have already turfed Harvey Norman and Myer, which have fallen 3.4% and 2.6% respectively. Electronics retailer and market darling JB Hi-Fi has shed 1.8%.
The online giant’s first weakness is that their business methodology is public knowledge. The company eagerly lists its Leadership Principles on its website.
On the surface, these principles seem innocuous enough for business purposes. However, there are weaknesses that these principles showcase, including an inability to be flexible.
Companies can also take the positive aspects of these principles, such as an eye to continuous improvement and interdepartmental synchronisation.
Amazon is the ultimate volume distributor, and they have deep pockets. This means that it can lower prices for individual items below what any local retail store or distributor will be able to offer.
If you try to compete with Amazon on price, the effort will be short-lived. If your customers learn to come to you for the lowest price, you will eventually end up cannibalising yourself.
2. Do not try to compete with Amazon on name brand product.
Amazon also has a larger selection of products than any local store will be able to procure. If you try to match the selection that Amazon has, you will probably end up running out of money.
3. DO create a unique brand.
You may not be able to support the number of brands that Amazon can, but you can support a few unique brands. Promote exclusivity instead of volume for best results.
Make sure that you are clear on your store brand as well. Selling the benefits of your brand as unique relative to Amazon within a particular niche can work. As a matter of fact, if you pinpoint well-performing products, you may be able to divert your entire brand message towards them and solidify your market position.
4. DO identify your best customers.
Use Pareto’s rule when identifying your best customers: 20% of your top consumers will give you 80% of your profits. So find out who they are, study them, and create a buyer’s profile that will streamline your branding efforts.
5. DO use Amazon’s weaknesses against them.
Amazon aims to remain frugal; however, this can mean that they will under-spend on media or promotional activities.
Amazon is also rapidly trying to build local knowledge and will always remain an American brand, which leaves them very exposed to changes in local trends.
They are unable to talk to customers face-to-face, but you can. Use this personal connection to create an emotional bond that they will never have.
6. DO use predatory marketing.
Predatory marketing, briefly, is where you use your competitor’s greatest strength against them. Where they are going to be marketing in Australia on terms of range, price, and distribution, you can focus on knowledge and being local.
You will need to study Amazon within your particular market niche in order to determine its weaknesses. For instance, it has breadth but does not have depth of product knowledge. They do not know which brands are the best and why, nor can they recommend them. You may be able to supplant them within that market niche because of your specific knowledge.
Amazon also has very little reward for purchasing in bulk or loyalty purchases. Your business can reward people for loyalty with discounts and other perks. If your perks are also locally generated, you gain an advantage over Amazon there as well.
7. DO use your relative advantages.
You have the ability to drill down into serving specific suburbs and streets. Use this advantage. You can also synchronise your sales and products with local events and holidays — or even the weather.
Use specific product knowledge to offer tutorials for products. Your expertise can drive you past Amazon in terms of personal service.
Emphasise the local nature of your staff and the face-to-face bond that you can create. Combine this with product knowledge, and you have the Bunnings effect, where you can show how local and personal you really are.
Give people the ability to test products firsthand — Amazon cannot do this.
Finally, use your local positioning to create excitement for your store brand and products. Throw PR events and create a personal experience for your customers.
The retail juggernaut’s coming to Australia has our suburban shopping centres and retailers feeling threatened. Competing with them on price and products will only make you lose out on revenue. So to shape up, you need to identify your top customers, use Amazon’s weakness, get predatory in your marketing efforts, and use your relative advantages.