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Why Amazon won’t be Australian retail’s Kodak moment

July 30, 2017

Written by Lisa Carter, SAS Group

There are a whopping 1,753 shopping centres around Australia (one of the highest numbers per capita than any other developed country) as at August 2015, according to the Urbis Australian Shopping Centre Industry Report.

And listening to the pundits, you can’t help but feel a sense of looming doom for each one of them, with Amazon en route, landlords looking to improve their risk by favouring international brands over domestic, and an ever-tightening squeeze on margins.

There’s no doubt the arrival of the AU$390billion behemoth on our shores is going to shake our industry to the core, and add even further challenges to those already upon us – it has a formidable business model, ruthless competitive culture, and can afford to incur large losses in the short term.

But like all businesses in a new environment, it will have to make money at some point in order the justify its existence, and absorb the same unique, Australian-made challenges as everyone else (e.g. fewer people with lower retail spend and spread out over larger distances; significantly less transport infrastructure to zip goods around at lightning speeds; much higher wages; negotiating with unions; dealing with a more complex industrial relations system; toeing the line on our strict competition and consumer legislation).

However, adaptability is an issue common to both Amazon and the rest of us – it’s anticipating we can’t, while we know just how well we can!

If we cast our minds back just a few years, we can see some spectacular splats from businesses that didn’t recognise the remarkable opportunities buried within a competitive threat. 

Film-dependent Kodak invented the digital camera, but failed to invest in it.

Late-fee addicted Blockbuster could have been our couch-companion, but couldn’t let go of old thinking (Reed Hastings founded Netflix after copping a $40 fine for returning Apollo 13 late, and then Blockbuster turned down the opportunity to buy Netflix, before famously nose-diving into liquidation).

Borders even outsourced its website to Amazon, leaving it with absolutely no avenue to create its own online presence, all the while continuing to expand its store footprint but filling it with ageing technology – CDs and DVDs.

More recently, globalisation has facilitated the entry of vertically integrated brands that have brought new price points, better buying power and lightning speed from runway to racks, with the increasingly competitive landscape taking its toll on Laura Ashley, Pumpkin Patch, Herringbone, Marcs, David Lawrence and Dick Smith.

And yet, while some have fallen, others have been rising – there are just as many retailers in Australia using these massive market threats as the catalyst for innovation, forward-thinking, and a focus on bigger, better and sparklingly bright ideas.

How? By concentrating their efforts on understanding and delivering what consumers want – speed, ease, quality, service, and price.

They’re consolidating and creating efficiencies across their network of stores; choosing better locations and closing superfluous ones; expanding their product lines; and embracing a full-scale, omni-channel approach that involves constant, relevant and value-adding digital engagement with customers (giving them a much higher number of touch points and creating stronger brand loyalty).

We’re also seeing an immense shift away from the traditional, cookie-cutter approach toward more luxurious centres that offer consumers an experience, filled with mixed-use spaces, greenspace and other services, all alongside an increased focus on omni-channel offerings and customer service.

This also gives stores the opportunity to differentiate themselves – even my local butcher decided some years ago was concerned he wouldn’t be able to compete with larger entries, and set himself apart by becoming an organic, grass-fed meat supplier with full accountability in the supply chain, a diverse range of associated products, an integrative online presence, and my favourite – home delivery!

Retail serves far more functions for consumers than just buying stock – the retail experience is now a vital component in getting to the point of transaction, and what’s abundantly clear is that it’s impossible to separate bricks from clicks these days, because consumers want, and expect, an omni-channel approach.

It’s quite the paradox that the more retailers and consumers embrace e-commerce, the more we also embrace those scarcities like individualised service, sincere human connection and attention, and the ever-evolving consumer experience – all things that simply cannot be automated.

So as we prepare for Amazon to land on our shores sometime toward the end of 2017, one thing’s for sure – we’re an adaptable bunch, and we’re not going anywhere.

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