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Message from the CEO: 2 May 2017

May 02, 2017

The media’s certainly been abuzz over the past week after retail giant Amazon finally (after months of speculation) confirmed it would be expanding onto Australian shores, with a distribution centre tipped to be in Melbourne or Sydney.

While many are already heralding the end of the retail world as we know it, or tipping that the sky is about to fall in, particularly given the behemoth’s promise to “destroy the retail environment in Australia”, we are a resilient bunch, and as history will show, we’ve evolved, adapted, innovated and risen to challenge time and again. And the arrival of Amazon will be the catalyst for another round of adaptation to meet the ever-changing consumer needs.

Amazon has a formidable business model, ruthlessly carving out its territory in the US through cutthroat prices, reliability, and lightning fast turnaround of goods, and there’s no doubt its arrival will send shock waves through the sector, as it can afford to incur large losses in the short term to offer the same Down Under.

However, like any other business, it will have to make a profit at some point in order to justify its presence here, and I’ve no doubt it will strike many a challenge in a unique environment like ours. 

We have higher wage costs, higher operating costs, and higher transportation costs. We have far fewer people with a lower proportion of retail spending, and we’re spread out over a far greater expanse.

Less than eight percent of our total retail spend is online (and 80 per cent of the online spend is with Australian retailers and online shops). Plus we have far less infrastructure to sustainably support the kind of speed and turnaround Amazon is promising.

Additionally, Amazon has not committed to opening any physical stores in Australia, and has put a temporary hold on its Amazon Go convenience stores. So with no physical stores, the market of Australian shoppers is rather small for a company of this size.

I believe there’ll be just as many challenges for Amazon as there are for Australian retailers. 

At the end of the day, increased competition is not necessarily a bad thing for the bricks and mortar or online, and it’s virtually impossible to separate clicks from bricks these days because shoppers want, and expect, both.

It’s quite the paradox that the more 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. These are the things that simply cannot be automated!

There’s no doubt some retailers will fall, but there’ll be plenty more Australian retailers who not only survive, but thrive.

Have a great week.

Dominique Lamb

NRA Media

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