Many have discredited Amazon’s initial entry into the Australian market as lacklustre; however Jon Reily warns ecommerce retailers that Amazon never dominates overnight, and there’s still plenty of reason to arm the fort.

When Amazon announced its intention to expand into Australia in 2017, consumers were excited, and retailers were nervous. Two years later, consumers are somewhat underwhelmed by the limited number of products offered, and retailers are still looking to the north wondering how the global ecommerce giant will make its next move.

Over the course of the last 12 months Amazon has made several small moves which would indicate it is attempting to grow its presence in the country, while not making any loud noises about its full intentions. 

• Amazon lowered the cost threshold for domestic shipping to $39, which is at parity with the US and UK cost
• Amazon recently named a new country manager for Australia who is a former Proctor & Gamble executive and was most recently the technical advisor to the head of the US consumer business
• Amazon recently expanded its Launchpad program to the country, which gives startup companies and entrepreneurs the chance to use Amazon’s infrastructure to sell their products in Australia and worldwide, and
• Amazon reversed the shuttering of Amazon.com sales to Australia, which continues to build awareness in the country of the brand.

This slow-but-steady path is consistent with Amazon’s strategy of playing the long game, and right in-line with one of the company’s core tenets: ‘don’t sacrifice long-term goals for short-term gains’. If Amazon so desires, it easily has enough capital to buy its way to dominance in any economy it chooses, but instead it follows a very measured approach. As a result, Australia is no different than Canada or Europe was to Amazon as it began expansion into those markets – a slow, steady upward curve over the course of five to seven years which ends in Amazon being one of the largest, if not the largest, players in the country. Australia will likely be no different; it’s not an ‘if’, but a ‘when’.

Therefore, retailers in the country would be wise to see Amazon’s slow moves as an extended measured expansion rather than a tepid response to the possibilities of the market or lack of success in current initiatives. When compared to previous expansion timelines into new markets, it is right on schedule to dominate market share in Australia in the next decade. If Amazon is able to copy its pattern of success in Australia as it has in other wealthy economies around the globe, there is reason for the current players to worry.

Amazon’s success in a new market is closely linked to its effectiveness in bringing new members into its Prime program. Amazon Prime, a subscription service that has more than 100 million members worldwide, launched in Australia in June 2018. And while 2019 sales from Australia on Amazon Prime Day were only about $2 million, it was a year-over-year increase of 15%. That shows a strong awareness of the Amazon brand in the country, and since Prime Day’s core purpose is to increase awareness and gain more members, it’s hard to argue that the ‘holiday’ was anything but a success.

Amazon setting its sights Down Under should come as no surprise. Australia is already one of the 10 largest ecommerce markets in the world and an attractive target. It has wealthy consumers, high population concentration in cities, a good transportation network and a strong digital culture. The Australian ecommerce market value will be $35.2 billion by 2021, and more than 80% of Australians shopped online in 2019. By 2021 the number of digital shoppers is estimated to reach 85% and more than one in ten items will be bought online. This is consistent with other countries where Amazon is a strong force.

However, recent studies show that more than half of Australian consumers are unsure if they can trust the US eCommerce giant, and that’s a great opportunity for Australian companies to step up their digital game and take market share now while it is still up for grabs. Thanks to previous eCommerce expansions in other countries, retailers in Australia have a unique moment to look to the past to see what others have done to counter this threat, and what worked and what didn’t, while still having time to act on it.

Australian retailers are poised at a golden opportunity to create experiences and gain customers through expansion of their digital offerings before the full threat of foreign interlopers to the market reaches the point of no return. Retailers who build programs that allow customers to interact with them seamlessly across digital and traditional channels – web, mobile phone, physical in-store – will be leaps and bounds ahead of ones that do not.

Australian retailers are no doubt concerned about the looming threat of an economic downturn, and many are probably wondering whether or not to make big bets or take on large-scale future-looking programs when many signs are pointing to recession. The best path is likely one of action rather than caution and making transformative digital moves now before a possible economic downturn occurs is the wiser path.

Consider that Amazon’s rise to dominance in the US ecommerce market took place largely during the GFC period of 2009-2012, and when prosperity returned to the US, Amazon was in a prime place to take advantage. Meanwhile, its competitors in the digital world were forced to play catch-up when consumers started spending again; the rest, as they say, is history.

Regardless of Amazon’s expansion and success in the Australia, the ‘Amazonification’ of consumer expectations will absolutely continue to spread through the country even if Amazon isn’t a major player in Australia.  Amazon has created the de facto global standard for what customers expect from eCommerce, and their service offerings will be table stakes for all retailers, digital and otherwise. The future world of commerce is a digital one, and retailers who embrace digital transformation and meet their customers where they want to be will be successful, and those retailers who do not will be left behind.

Jon Reily is VP, global commerce strategy lead at Publicis Sapient

Further Reading:

• Both Amazon and Google see advertising revenue rise – Amazon net falls short »
• Amazon ad business forges ahead with Sizmek acquisition »
• Slaves to Google and Amazon – what happens when data reliance gets out of hand? »

Image credit: adrianhancu