Everyone has heard of Amazon, and we’ve probably all interacted with or bought from them despite them not having a presence beyond eBooks or streaming here in Australia.

Amazon have come a long way from their early days of selling books online. They’re now creating TV shows and innovating fulfilment (distribution), and now they’re on their way to Australia. With their impending arrival looming, those who stand to lose (or win) are trying to predict the repercussions and how will it influence the market.

You may be wondering, “Why is it important to be aware of Amazon launching?” Well, the Australian retail landscape is on the verge of being drastically disrupted.

Despite Australia being a fairly mature market, most brands realise their ecommerce platforms – if they exist at all – are inferior to that of Amazon, and their fulfilment is vastly underserviced. Research shows that the majority of retailers don’t have a plan to combat Amazon’s arrival; in fact currently only 14% have a plan in place, which if we look at America isn’t enough – even if you’re a big player already:

“I wish we had moved faster.” – Former Wal-Mart CEO Mike Duke, 2012

Ultimately Amazon has a very different philosophy, even compared to Google and Facebook, and it permeates every aspect of their business.

  1.  Amazon obsesses about customers, not competitors. Everything is articulated from the view of the customer.
  2. They have an eagerness to invent and pioneer, but control this with stringent processes. In general, they start at the end goal and work backwards.
  3. They have a willingness to fail and the patience to think long term. They don’t move fast and break things; they value consideration and review rather than the more popular “test and learn” system.
  4. They take pride in operational excellence.

In addition to their unique approach, Amazon also have a diverse yet cohesive business model, including dedicated arms for e-commerce, bricks & mortar retail, AI, hardware, fresh grocery, content, and AWS.

 

How do we expect consumer behaviour to change?

Amazon has changed the way consumers shop online, offering such a seamless shopping that consumers have grown to expect it from others. When shopping online, 64% of Americans visit Amazon before a search engine. Only 30% start on search engines, and 16% on retail sites – a drastically different profile to Australia, and one that we may well see ourselves shifting towards.

Considering their enormous web footprint, it’s clear they have huge potential in the advertising business that hasn’t yet been realised.

Amazon also changes the way people search online. When they launched in Mexico in June 2015, generic product-based searches increased by 159% YoY, compared to 53% for retailer (branded) searches from similar baselines. We’re already seeing a similar shift in Australia, where brand terms are up only 35% compared to 49% for generic.

So what can we do?

Amazon is an intimidating rival. But there are 3 key ways it may be possible to capitalise on Amazon’s launch:

1.     Be Fast

2.     Be Found

3.     Be Personal

Let’s explore these in a little more detail.

1.     Be fast

 

a.     Site Speed

The new standard for site speed is one second. Amazon have said that for every 100ms improvement in site speed, their revenue increases by 1%.

40% of users will also abandon a site that takes more than 3 seconds to load, which is why we at iProspect look to prioritise site speed improvement as part of any project.

Amazon loads well within the 3-second limit at 2.8 seconds. But among Australia’s top retailers, the average load time is almost four times longer at 10.9 seconds.

b.     Speed To Purchase Matters

“Click and collect” searches spike after Amazon enters a market, as consumers become accustomed to the level of service and want things quicker than ever.

These types of searches are already up 6X in Australia, with mobile overtaking desktop in 2015. Work with your iProspect team to set up and show local inventory campaigns to satisfy users’ appetites and be in front of them while they have their phones in their hands.

a.     Remove shopping points of friction

Users now expect a seamless shopping experience and to be able to purchase things quickly. Amazon nails this with their one-click-purchase functionality and their Prime accounts, which work together to streamline both the purchase and delivery to bring the customer that gratifying feeling even sooner.

 

2.     Be found, and make it seamless

 

a.     Make your products and stores discoverable

As mentioned previously, “Click and collect” searches spike after Amazon enters a market. You need to make your products and stores easier to find for the consumer; one way is to use shopping and local inventory ads on search, and product or collection ads on social.

Provide relevant results to users. Utilise different targeting options across platforms based on each audience’s behaviour and devices to deliver a tailored and personalised experience that meets their needs in the moment.

For example, Australia has yet to fully adopt shopping ads (only about 25% of retailer spend currently goes here) – this is an opportunity to strengthen your visibility here while you can, before Amazon’s arrival. Coupled with ads showing inventory in specific locations, it’s possible to ensure stock is more discoverable and easier to purchase.

 

b.     Capitalise on the Amazon Marketplace

While we won’t be able to make use of any of Amazon’s advertising streams until 2018 (at the earliest), you can capitalise on Amazon’s marketplace and optimise your brand’s presence on the platform to ensure a seamless experience across all your channels, from your website to Amazon and any other resellers. Here’s how Lego does it:

Lego’s Amazon Page:

Nerf Amazon Page:

3.     Be personal and smarter with every interaction

Despite its billions of consumer interactions and engagements, Amazon personalises each touchpoint to over half of all visitors, which helps drive customer loyalty and increased revenue. This relies on solid data strategy, something that we at iProspect believe is pivotal for every business with an online presence.

With a single customer view of a user, data can be used to drive value to the customer. 35% of Amazon’s revenue is generated by its recommendation engine helping to serve the right person with the right message and the right time.

Our specialist data team addresses this process by managing and segmenting data, and activating media to serve users the most relevant ads possible in an easy, relevant and dynamic manner. There are 3 key steps when looking at your data strategy:

  • Collect user data – Make sure you collect the right user data across CRM, Offline, analytics, campaigns and ads.
  • Deliver value to the consumer rather than solely for your benefit
  • Use partner data and add another layer to your targeting and personalisation strategy

 

Final Thought

8% of all online retail sales in AU/NZ are already happening on Amazon, and this number is only going to grow.

But a loss in sales volume won’t be the only threat to revenue – there’ll also be significantly stronger price competition, which will likely see sales migrate to Amazon, whose economies of scale allow it to be less profitable. It’s also expected that there will be significant pressure to offer free shipping, which will further impact margin.

The thought of Amazon’s launch to market may not be comfortable for some, however there are many reasons to be excited by the change, not least because it gives us the opportunity to look for areas on which to capitalise, as outlined above.

Without a doubt, the biggest thing to be excited about is how it’ll change our retail experiences as consumers. Amazon should see the user experience across all verticals improve as our collective expectations increase, meaning more convenience and more choice – which can only be a good thing.

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Iain Addy

Iain is the National Head of Paid Media and Partnerships at iProspect Australia. Iain works closely with key partners to implement market leading strategic media and technology partnerships that deliver a step change to iProspect and the businesses of our clients.