Finally, the time has come. In April 2017 the US superpower that is Amazon announced their plans to launch down-under. The news sent Aussie retail into a flurry, and there was much speculation about when they would hit the green button. Creating consumer excitement and suspense that Australian retailers could only dream of warranting.
On Tuesday 5th December, consumers dreams were realised and retailers nightmares began. Just in time for the Christmas rush.
Consumers and Sellers Rejoice
While the Australian retail industry is losing sleep (fair enough), competition entering the Australian retail market is fantastic news for consumers. Australia's retail scene has long been dominated by just a few major players including the likes of MYER, JB Hi-Fi, and Harvey Norman. Many of these brands lagged behind in bring their online service up to global standards. They were complacent and with no significant competition to encourage them to improve, the standard of service in Australian retail stayed in the dark ages while the rest of the Western world advanced online.
Making their entry quite smooth, Amazon is already considered a well-established brand to Australian consumers. Amazon.com.au has been around since 2013. Only now, rather than just selling eBooks, they will offer 23 categories from electronics to software, fashion to beauty. Products are both provided by Amazon's retail and Amazon Marketplace, where 3rd party sellers can register to sell their wares.
This launch is not only positive for consumers but also for sellers. Independent brands who have previously been selling through their own website can now tap into a whole new customer base and leverage the brand of this global superpower.
While Amazon had already worked with many Australian sellers for many years, the process has been somewhat convoluted with products needing to be shipped overseas for distribution. The establishment of their distribution warehouse in the Melbourne outskirts will make it easier for speedy shipping of just one day and encourage more sellers onto the platform, thanks to its ease and convenience.
Disrupting Australian Retail
While consumers and sellers are set to benefit from Amazon's entry into the market, it is no secret that Australian retailers are likely to lose out. Big time. It is rumoured that Amazon's entry strategy will include underpinning the standard price point of Australian retailers by a whopping 30% to absorb losses early and grow their market share. A move that many Australian retailers will most certainly not be able to compete with.
On a list put together by Interbrand, ranking the top 100 brands across the globe, you can quickly see an absence of Australian representation. Not a single Australian brand is on the list. Amazon comes in at #5. This makes them the 5th most recognised brand in the world. If that doesn't send chills down an Australian retailers spine, they have likely already given up.
Amazon's disruption of the Australian retail sector could be seen before the company even took their first orders. Shares prices from the day before they announced their plans to launch in Australia, compared to just recently show investors losing faith in Australian brands like Harvey Norman and Myer Holdings, whose shares are down 9 percent and 39 percent respectively.
If Australian retailers want to compete, it is unlikely they are going to be able to do that on price. Experts suggest, if they're going to stay in the game, they need to focus on customer service. No one will be able to match the deep pockets of Amazon.
Australia Tightening Regulations
Unsurprisingly, the fearful retail market has gone to the Australian Competition and Consumer Commission (ACCC) to see if there is any way to lessen the impact of Amazon's entry and to ensure they are held to account; operating by the book. Sadly for Australian retail, the ACCC has said that Amazon.com.Inc (AMZN.O) was able under law to set prices low enough to win business without breaching competition laws.
Another issue Australia faces with large foreign companies is tax avoidance. The government now enforces new measures known as the “Earned here, Taxed here” corporate tax laws, and you can bet they will be observing Amazon to ensure that they comply.
Amazon is not the only big US company that could feel the heat from the ACCC. An inquiry was recently announced to look at the effect search engines, social media, and other digital content aggregation platforms are having on media and advertising markets. The inquiry was proposed after watching drops in advertising revenue through traditional media companies. The ACCC will investigate whether these digital platforms are "exercising market power in commercial dealings to the detriment of consumers, media content creators, and advertisers."
As the markets globalise through the internet, it seems the Australian government is scrambling to tightening controls and introduce regulations to keep up with global standards and keep Australian consumers and businesses safe. No industry is immune to scrutiny.
Betting on Online Control
For the betting industry, 2016 saw the appointment of a new Minister of Human Services, a role filled by Alan Tudge with the task of bringing Australia’s $20 billion gambling industry in line with modern standards. Regulations were put in place swiftly. With the first being that sports bettors can now join an online self-exclusion register; Online bookmakers are required to offer a pre-commitment scheme to customers; Virtual sportsbooks are no longer able to offer lines of credit or “free bets” to their Australian customers.
Then in 2017, The Interactive Gambling Bill of 2016 was formally introduced, causing many operators to pull out of the Australian market. Something we can likely expect to see in the Australian retail sector as Amazon steals market-share and regulations cripple the industry.
The Interactive Gambling Bill of 2016 places a ban on all forms of iGaming which aren’t explicitly legal within Australia; Gambling advertisements are banned during live sporting events; Offshore gambling operators are not able to legally offer services to Australians unless they receive a license from Australia. This essentially cuts off entry to any offshore gambling operators looking to market to Australia.
For the retail sector, there is no firm prediction on what regulations will come. The next 12 months will prove a compelling test case in the government's ability to reign in these giant tech companies and the power of the internet.
Here at Digital Fuel, we are tech-savvy experts with a firm hold on industry regulations, ensuring our clients navigate new waters without losing opportunities online. Get in touch with our team today to see how we can help you.