The retail world has been recently rocked in the United States with the announcement of Amazon’s intention to acquire grocer Whole Foods Market. Much has been said about this acquisition which will bring Amazon solidly into the $700 billion (U.S.) grocery industry with a large number of brick-and-mortar stores. But this move also could signal a more global effect with potential Amazon acquisitions of grocers in other regional markets.
And speaking of retail disruption on a regional scale, according to a recent Bloomberg article, Amazon is now attempting to break into “one of the biggest and most sparsely populated nations where bricks-and-mortar retailers are king”—Australia.
The arrival of the marketplace behemoth is a good news/bad news situation. The good news is that consumers will benefit as Amazon’s arrival disrupts the Australian market and drives down prices. From a selection standpoint, there will be more choices available for Australians than ever before.
The bad news is for existing Australian retailers. As Daniel Lees, research director at Colliers International, said in an Inside Retail Australia article, “The Australian retail sector is undergoing immense change and disruption, forcing retailers and landlords to refine their strategies and align better to consumer preferences.” Retailers are under intense pressure to reduce costs to remain competitive, but they must recover margins somehow if they want to remain in business.
Amazon has been selling books, e-readers and digital content in Australia since 2015. In April, Amazon announced that their next step is to bring a retail offering to Australia. Previous speculation stated that Amazon would start rolling out its services in September, but some retail offerings could come online as early as July. Business Insider Australia reports that based on research by Credit Suisse, “Amazon will likely reach a better than 5% market share in many retail categories within five years of arriving in Australia.”
And as I alluded to above, Amazon could use acquisitions to fuel its growth in Australia. “If Amazon decides Australia is priority it can pretty much buy who it likes. Woolworths, Coles or Metcash seem complex targets, but if it follows its Wholefoods acquisition, it could look to buy an upmarket retailer,” states another article from Inside Retail Australia.
How can retailers compete?
Given the doom and gloom over Amazon’s entry into Australia’s retail scene, the outlook may look bleak, but there is hope. Brick and mortar and omni-channel retailers can focus their efforts on competing on price without getting caught in a race to the bottom as they drown in price cuts while fighting for market share.
As we’ve seen first in the U.S., then in Europe as Amazon has continued to expand its global reach, successful retailers have responded to Amazon’s dynamic pricing by adopting science-based pricing of their own. By utilising analytics that understand shopper price sensitivity and competitive elasticity item by item, across both online and in-store channels, retailers have both priced with consumer-centric sensitivity and met their financial targets by delivering highly targeted, algorithmically driven pricing and promotions.
Retailers in Australia should now seek to embrace proven technologies that enable them to offer meaningful, targeted prices and offers that resonate with their customer if they want to meet growth targets and compete against Amazon. The time is now for them to refresh their pricing strategy and take the opportunity to move to optimised omni-channel ecommerce by harnessing real-time market, competitive, and customer intelligence to deliver a seamless shopping experience—both online and in store.
With Revionics’ proven data-driven analytics, retailers can provide targeted prices and offers that respond to customer and competitive environments on items where customers are focused on price, while preserving margins and the bottom line on other items. Competitive, customer-centric pricing paired with a meaningful in-store experience will have a notable effect on your ability to both attract and retain customers. And with our incremental adoption models, many retailers have successfully implemented a self-funding approach where the margin gains from one phase of price optimisation adoption funds the next phase, or generates resources to invest in other innovation initiatives.
How will you respond?
We’d love to work with you to include the lessons we’ve learned guiding scores of retailers globally along their successful pricing optimisation journeys—specifically factoring in the current market conditions in Australia. We’ve captured this experience into a “crawl, walk, run” evolutionary approach of price optimisation implementation that allows you to adopt at your own pace and use the financial savings from each phase to fund the next phase. You can learn more by watching this video. I also invite you to contact me directly to start the conversation.