Amazon Retail is Coming to Australia are you ready?

You can read up on it here.

They have a warehouse in Melbourne and are advertising for 140 positions in Sydney and 20 jobs in Melbourne, and everyone is talking about it. I noticed a piece by Chris Samartzis the general manager of VANA who has a lot of retail experience that has written his opinion on what Amazon coming to Australia, means. You can read it here.

From what I am reading is that he feels that Australian business conditions are different enough to be in his words "not necessarily be conducive to the pure play model of Amazon." He does accept that Amazon has incredible resources behind it. He also feels that if Amazon attempts to enter the brick and mortar channel, in Australia it's going to be effected by the same problems as any other brick and mortar company so its not going to destroy the current brick and mortar channel.

I am only partly in agreement. It will not destroy the brick and mortar channel but it will change it. I was one of the first customers of Amazon and have been following them for many years. Firstly, Amazon is not coming to Australia; Amazon is already here. A large percentage of Australian consumers are currently its customers. A better description is that Amazon is expanding its operations in Australia. This is a big plus. It is much easier in retail to sell an established customer who has brought two books off you, a third book then it is to sell someone who has never brought off you a first book. Amazon has an established market here. They are very used to dealing with other countries, and I doubt our laws and labour requirements are much different or tougher than the European Market.

Australian investors are clearly worried. Australian retailers on the sharemarket have lost about $200 billion in the ASX recently due to Amazon. Now I will try to explain what is happening on the share market and why Amazon is such a threat. For those that know something about the share market, you will know what I mean when I say that Amazon P/E is over 240. Translated a SMB business opened a warehouse that costs a million dollars, it would require for a million dollars of valuation, about three years profit or about $300,000 of profit a year. A large multinational like Wesfarmers requires for a million dollars of valuation about $60,000 of profit. An Amazon shareholder is happy with 4,200 dollars of profit. Clearly, the investors in Amazon are not looking at the short or medium term. They are in it for the long term.

Exactly what Amazon means in the long term. Let look at some of their assets because that is what many of you are now going to see now.

1) They have a well-established VIP marketing system with an effective predictive marketing system. You buy something, Amazon will suggest other products. With their VIP club, they keep in touch with their clients. We need to get our clients who use VIP marketing up on a predictive marketing system too.

2) Amazon have a fast and affordable delivery system. You need to look into a delivery.

3) Amazon has a terrific eCommerence website which is extremely informative. You cannot just stick around with a small tiny eCommerence solution. You need something professional.

Retail is changing. You need to adapt.