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Retailers aren't ready for Amazon... are delivery companies ready?

Blog

Retailers aren't ready for Amazon... are delivery companies ready?

Ian Kerr

Some Australian retailers are pooping their pants at the prospect of Amazon's imminent arrival, but what are they doing about it? Precious little, according to research published by the Commonwealth Bank.

The survey showed that 70% of retailers were aware that Amazon is coming. It's mind-boggling that 30% of Australian retailers unaware that Amazon's lean, mean, well-oiled e-commerce machine is about to be unleashed down under.

Yet even among businesses that are aware of Amazon’s plans and consider it a threat, only 14% had a strategy in place.

Most were focused on outcompeting Amazon on its own ground by providing a superior customer experience (33%) or offering better products (30%). "Few planned to respond with truly disruptive change," according to Jerry Macey, National Manager, Retail Industry Business and Private Banking at the Commonwealth Bank.

Marshall Hughes, CEO and co-founder of crowd-sourced delivery startup Passel, says attitude is central to Amazon's success. "One of Amazon's biggest advantages isn't size, robots or data. It's a mindset that says, 'Let's try it'," he says.

Innovation in delivery

Are Australia's delivery companies (including Australia Post) ready to innovate in delivery? Competition in B2C delivery is growing, with new entrants such as Sendle (who just inked a new international deal with DHL) joining companies including Toll and Fastway that previously focused on B2B deliveries.

“I think what will help drive an improved model [in Australia] will be Amazon acting as a big aggregator, helping the industry move from a traditional one-carrier delivery model to more of a service-based network where the-end business or end-customer is getting a better experience, and those organisations will end up sharing more of the work among themselves,” Linfox’s General Manager – Operations Development, John Pucek, told Logistics & Materials Handling.

The giant in B2C delivery is Australia Post. In recent years, Australia Post has added new delivery options:

  • Parcel lockers - the locker network is small but well-used
  • Delivery direct to the post office - cutting out failed first-time deliveries to residential addresses
  • Delivery to a safe place (unattended delivery)

Other initiatives have been trialled and shelved, such as:

  • Two-person delivery for heavy items
  • Early morning / evening deliveries
  • Same-day redelivery attempts

And of course there was a one-off media stunt involving a drone in a paddock.

The need for speed

I have emails from major Australian retailers who acknowledge they need faster delivery, love the concept of Passel, yet have written: "come back to us when you have proven this at scale". 
In the meantime, their "innovation" may consist of moving the stock wider apart in stores, changing the colour of the background on the homepage, or offering "buy it now" options on Instagram. And then making the customer wait five days for delivery!
- Marshall Hughes, Passel CEO and co-founder

The last mile in Australia offers unique challenges. The population is relatively small, population density is low (even in cities, thanks to suburban sprawl), and there are huge distances between the major population centres. Fast delivery can be costly. Who can challenge Amazon with free and fast delivery?

Can you out-Amazon Amazon?

Australia Post has partnered with some e-commerce retailers to trial a service called Delivery Club. (Check out Episode 77 for a full analysis of Delivery Club and NZ Post's equivalent, Shipmate.)

Delivery Club is a subscription service. It costs customers $1 to sign up. Customers then get free shipping on on orders costing over $25 with a total delivery cost under $20. The trial is due to finish soon.

What about booze?

Australia Post is a big player in wine delivery. Wine packs are the bane of delivery drivers' existence - they're heavy, fragile, and exempt from the packaging requirements placed on other liquids carried via the post.

There may soon be more wine packs in the back of Australia Post Contractors' vans. Australian online wine retailer Vinomofo has announced a new partnership with Australia Post that includes same day and customisable delivery options.

“Australia Post has really improved their delivery offering ahead of the arrival of Amazon, so it’s pretty exciting that [our customers] can order a case of wine on a Friday morning and be drinking it come Friday afternoon," says Vinomofo’s co-Founder and joint chief executive, Andre Eikmeier.

A good move by Vinomofo, since Amazon is offering alcohol delivery to some areas of the USA. Prime members can pay $8 for one-hour beer, wine, and spirits delivery (or get it for free, if they’ll wait two hours) in 12 cities: Cincinnati, Chicago, Columbus, L.A., Minneapolis, New York, Phoenix, Portland, Richmond, San Diego, San Francisco, and Seattle.

Could small Australian wineries and craft breweries soon be selling via Amazon?

The taxman cometh

From 1 July 2018, new laws will require online marketplaces to collect the GST at the time of sale for imports worth less than $1000. (GST = Goods and Services Tax, the Australian equivalent of VAT.)

Some e-commerce retailers, seeing their offshore competitors ship cheaper products to Australian customers, had expressed the hope that imposing GST on all imports would even the playing field.

Will it truly create a level playing field? Possibly not, especially considering the puny international shipping costs incurred by manufacturers in some countries. And it won't compensate for higher production costs in Australia.

Once Amazon has established a local operation - and barring any exceptional loopholes - it will charge Australian customers GST on purchases.

Further listening

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Photo by Martin Falbisoner.