SMEs reveal strategies for surviving Amazon

With confirmation that Amazon is likely to launch in Australia before year’s end, My Business canvassed a range of business owners to hear how they are preparing for the changes to come.

According to Russell Zimmerman, head of the Australian Retailers Association (ARA), substantial change in the Australian business landscape is inevitable once Amazon begins trading here.

“They are a disrupter, so we need to understand that – they will disrupt the marketplace,” he tells My Business.

So it begs the question, how do Aussie business owners feel about Amazon shaking up the local market? What strategies are they employing on the ground to make their own businesses more resilient in the face of change, and better placed to take advantage of new opportunities?

Having spoken with numerous business owners across a range of industries, there are a few key messages that come to the fore:

  • Be impeccable on the customer service experience you deliver
  • Manufacture your own products wherever possible
  • Bed down exclusive importer agreements
  • Focus on products which are unique or difficult to source
  • Improve your deliver options
  • Leverage the increased uptake of e-commerce Amazon will likely generate

Here are the thoughts and strategies of just a few of your SME peers:

Matthew Devitt, online retailer Greenlife Online

For Matthew, Amazon doesn’t really present any new challenges to his business, given the giant marketplace simply can’t compete on service and reliability.

“Amazon’s pricing and marketing firepower is much better than ours, but at the same time the same can be said for eBay and that doesn’t concern me much at all,” he says.

“Some of the brands we sell now are already available on Amazon, (US) or direct from Asia, and so that doesn’t really concern me too much. Personally, when I have looked for items on Amazon, I have found there to be multiple duplicates of the same product and inconsistencies in the information – it really puts me off.”

What change it will bring about in his business, says Matthew, is an even sharper focus on his core brands and USP (unique selling point).

“It would likely just accelerate our transition to other brands, and drive us to seek more unique brands that fit out ethos, and to move towards becoming a manufacturer of our own products (which is part of our plan over the next 18 months).”

Rather than look to boost his selling power through Amazon, Matthew says: “I’m moving in the opposite direction, and looking to keep things as exclusive as possible. In the future, I can see Greenlife moving to a position where the brands we sell are either made by us and/or available only through our own store”.

“Amazon is obviously a huge company with a limitless range – but they don’t have a brand. They’re not [a] store that anyone really connects with on an emotional level. Cheap stores come and go all the time. Strong brands can live forever.”

Todd Lynton, high-end lighting retailer Special Lights

Rather than get caught up in hysteria about Amazon, Todd takes a very considered approach to the type of products that Amazon is likely to sell, and how that aligns with his own product offering.

“I’m certainly not concerned about Amazon. The space that they operate in ... their low-hanging fruit is different. Their low-hanging fruit is homogenist, high-volume items – so electronics is one, books of course is another,” he says.

“Lighting is a very interesting thing: there is no individual product that you can call a high-volume in the same way a phone or a TV or a book is high-volume. It is massive wide choice because it’s all about design and look, so there [are] thousands and thousands of SKUs, and you might only sell five a year of an average SKU; it’s not a high turnover.”

He points to items that, for example, require specialist freight due to their size, weight or packaging needs – such as delicate items with lots of glass or crystal – as being unlikely to make their way onto Amazon’s platform.

And, just like Matthew of Greenlife Online, Todd says that service is not a core component of Amazon’s offering.

“That’s not what Amazon does, so that area of our business, which is our design services division, they can’t do that – maybe they could get the lights from somewhere, maybe the same lights, maybe supply them a bit cheaper, but it’s not going to help when the architect says, ‘You know that room that was the bedroom, it’s now going to be the kids’ play room and I’ve extended it two metres, so we’ve just adjusted the plan’.”

Ethan Nyholm, tech accessories manufacturer STM Brands

“They are one the biggest retailers in the world, we welcome working with Amazon,” says Ethan.

“It’s a combination of excitement and trepidation. More on the excitement side, we have worked with them in the US and EU/UK for many years now and because of their size, range of products they supply.”

Ethan says that one of the most noticeable advantages for business owners and consumers alike arising from Amazon is a greater emphasis on service delivery.
“Amazon’s website (more specifically the product reviews) is used as a reference point for many consumers. They lift everyone’s game,” he says.

“It definitely will advance online retail in Australia and make sure that pure online retail stores lift their game from a logistics and fulfilment perspective. I think that it may also help refocus traditional retail around in-store customer experience, product assortment, upselling and other sales skills. It could be the rebirth of the salesperson!”

Philip Bartholomew, pet store chain My Pet Warehouse

“I see it could potentially open us up to 15 million new customers if we make the conscious decision of becoming a part of the Amazon marketplace,” says Philip.

“We manufacture a range of pet products for the My Pet Warehouse group, and so we would then look at placing those items on Amazon.

“Where you’ve got the same-for-same product, yeah it’s an issue, but our pricing is generally in line with what it is for example in the US ... it’s about where it needs to be. In our case, price won’t necessarily ever be a big deciding factor, but it will be the main one. But otherwise, I don’t know, it’s probably too early to tell.”

However, the biggest opportunity for established businesses, he suggests, is the disruption that will take place not in retail but in logistics.

“I think it will force people like Australia Post to smarten their act up, which will actually also help our business.”

He urges businesses who aren’t currently doing best practice with their deliveries to shape up or prepare for the worst, given that Amazon’s proposition on same or next-day delivery will be hard to compete with.

“[I read an article recently] looking at Myer, and [the customer] said they ordered I think on a Monday and they didn’t dispatch it ’til the Friday, which meant they didn’t get it until the following week. That’s just a recipe for disaster,” says Philip.

James Chin Moody, digital courier platform Sendle

“Amazon’s impending arrival in Australia is a nod toward growing confidence in our e-commerce sector. In the short-term, Amazon will help get Australians even more comfortable with online shopping [and] give the whole e-commerce market a boost,” says James.

“It will push the e-commerce market to keep improving and in the long-term, we’ll see that customer expectations around the shopping experience and shipping times will change.

“As a courier service built for the digital economy, there’s a lot of opportunity to improve the shipping and delivery end of the e-commerce experience.”

Several other companies that My Business approached for comment declined to speak on the matter.

 

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