Amazon has announced plans to establish warehouses in every state in Australia by 2018, stocking products in more than 30 categories. Amazon currently dominates the eCommerce market in the US with 43 percent of total online sales, so expect them to change the game in ANZ as well. This, however, is just the tip of the iceberg with the world’s biggest online shopping company Alibaba also quietly opening offices in Melbourne and has plans to expand into New Zealand as well. Hamilton city have also publicly expressed interest in being the first location for an Amazon New Zealand headquarters.

How will this affect retail and eCommerce in New Zealand?

This is going to be great for consumers providing greater variety of choice. It is likely to influence downward pressure on prices, especially as Amazon can afford to forgo profit for a long time to expand its market share. They are also likely to outspend local retailers on advertising across the search and social networks, to increase their market share. This could mean the cost of advertising within those categories is going to increase and push some local advertisers out. Due to the size of Amazon's website, they will also dominate organic search for both generic and branded search. The end result is improved speed and cost of delivery, thereby increasing customer expectations for other retailers.

According to Forsyth Barr research, Amazon could build a business with annual sales of $915 million in New Zealand in just five years. In short, it is a big threat to local retailers and eCommerce businesses.

Why does this matter?

eCommerce continues to outpace that of offline retail. New Zealanders’ total online retail shopping spend was up 8 percent for 2017 compared to July 2016 and much stronger than that for local brick-and-mortar stores which was only 2.5 percent compared to July 2016. Annual online spending across the main retail categories in New Zealand is estimated to be $4 billion, or 7.7 percent, of total retail sales. In the United Sates this is more like 14 percent and growing fast, so there is still a lot of room for growth locally, which is one reason Amazon have entered the marketplace.

However, contrary to Australia, New Zealand appears to be losing market share to international eCommerce players. New Zealand firms had a 66 percent share of online shopping by New Zealander’s, but that has steadily decreased down to 54 percent, which should be a real concern to New Zealand retailers. A key reason for this happening is that many New Zealand retailers have been resistant to the opportunities online and have not invested adequately into systems, processes and people required to embrace the opportunities eCommerce brings. According to research by Spark Lab, New Zealand SME businesses are at most risk.

The opportunities are huge; consumer spend is clearly there, but retailers need to realise that they need to work much smarter for online dollars. Working smarter means knowing what customers value most – and outperforming competitors on those key value drivers.

So how can you Survive Amazon and Thrive?

1. Embrace the eCommerce and data revolution. Do not to wait until Amazon get here, start making a plan today

Local retailers are not going to be able to compete against Amazon on choice, price or delivery, so instead focus on your strengths and those areas where Amazon cannot compete e.g. locality, personal service, flexibility, expertise etc. Start collecting and analysing data to help you understand your customer’s needs, gaps in the market and how you could better meet their needs. Map their needs out across the entire purchasing journey then work to enrich your customers’ experiences and relationships based on this.

2. Assess how effectively your customers’ in-store experiences compare with and reflect your customer’s online shopping experiences

Given brick and mortar shops have existed much longer than eCommerce stores, many businesses have learnt how to efficiently streamline the purchasing process in-store. However, many are still figuring out the best approach online. It is important to consider how customers interact with your online store and ensure that the purchasing process is as easy online as it would be in-store. Consider:

  • When customers search your store or product on their phone, does it work seamlessly or does it inadvertently steer them to a competitor?
  • Does your loyalty program work seamlessly off and online?
  • Can customers select from a range of different delivery options?

3. Review your entire online shopping process from start to finish and understand the different touchpoints along the way

If there are any pain points, changes should be made to remove these potential conversion blockers. Such changes might include focusing on SEO to improve search rankings, integration with your existing loyalty system or the introduction of free shipping.

4. Above all local retailers should look to provide blended physical and digital retail experiences which create value for customers

To help achieve this your website should integrate seamlessly with your other systems such as instore POS (Vend), ERP, CRM and Stock systems (NetSuite, SAP, Dynamics etc). This will allow your organisation to better track and cater to each individual customer, understand their purchasing patterns and personalise offers to them, doing the thinking for them. 

5. Leverage email marketing to its full effect

This should include abandoned cart emails and personalised product recommendations. Additionally, focus on growing your customer database to extend the reach of these emails.

6. Retailers should be mindful of the channels they invest in for advertising

Retailers need to recognise the decline in consumer attention to traditional advertising and capitalise on the reach offered by online ad metrics.

It’s time for retailers to stop worrying about being crushed by a global ecommerce wave and get a plan in place to ride it. Businesses that focus relentlessly on market/customer perceived value consistently outperform competitors financially.

OneClick are experts in eCommerce and can help you maximize these opportunities. Get in Touch and see how we can help you and your business embrace the revolution.

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Jason Platt

Author: Jason Platt
Published: 12/10/2017