American e-commerce goliath Amazon has become a “critical partner” for a major cross-section of local retailers, a leading retail analyst says, as the company leans towards a projected Australian turnover of $5.5 billion.
Investment and advisory group Jarden projects Amazon’s Australian operations will hit that milestone next financial year, The Australian Financial Review reports, some seven years after promising to upheave the e-commerce sector.
With the cost of living only rising, shoppers are increasingly open to price comparisons which platforms like Amazon provide, said Ben Gilbert, Jarden’s research lead.
High uptake of the Prime membership service suggests further growth is likely, he added.
Amazon itself has indicated no signs of slowing down.
It has announced plans to recruit 1,000 seasonal logistics and fulfilment staff through the mid-year period, and plans to complete its Perth fulfilment centre in time for the 2023 holiday shopping rush.
John Batistich, a retail expert and non-executive director for Zip, says Amazon is gaining ground where other e-commerce platforms are not — and has overcome early difficulties to become a vital outlet for some small business categories.
Amazon is “really one of the successes in total retail, let alone e-commerce,” Batistich told SmartCompany.
Where most e-commerce businesses are struggling to match the sales volumes logged through the locked-down years of 2020 and 2021, and the burst of consumer spending observed through early 2022, Amazon is continuing to grow, he said.
“There are very few [e-commerce retailers] that are showing any growth at all, with the exception of Amazon growing, because they have the widest range,” he said.
“Not necessarily the best price. But they certainly exceed any expectation in the market for the speed and convenience of delivery and the convenience of returns. They exceed the market on those dimensions.”
Crucially, the US company has reformed customer expectations around the cost and speed of deliveries, especially considering the successive price hikes imposed upon small businesses by traditional delivery partners.
“It’s become incredibly expensive to dispatch and distribute last-mile e-commerce goods in Australia,” he said.
“And what Amazon has done — the five-day wait, $10 a parcel — the convention has been disrupted.”
Amazon is not shy about flouting its benefits to businesses, either.
It claims some 14,000 local business sell on its platform, extending all the way from major toilet paper producer Quilton to hair styling brand Mermade Hair and innovative underwear label Step One.
Given the scope of Amazon’s offering, Batistich sees Amazon as a must-consider option for some local businesses.
E-commerce consumers can be broadly divided into two buckets, Batistich said: ‘considerers’ versus ‘preferrers’.
‘Considerers’ are those who will cross-shop your product against alternatives and those who may see an all-in-one marketplace like Amazon as an easy, fast way to find the best deal.
For businesses in “home, leisure, outdoor, some grocery categories, [Amazon] is a critical partner,” he said.
“It gives you access to customers beyond those who will visit your site.”
Aligning with the platform can also streamline overall customer acquisition costs that would have otherwise gone to third-party search engine optimisation and social media marketing.
However, ‘preferrers’ include shoppers with specific tastes and brand allegiances, who may not be so keen to put price and convenience above all else.
“If you’re working in luxury, or premium goods, or fashion, Amazon is not going to be the best of those marketplaces,” he added, pointing to fashion-minded alternatives like The Iconic.
The cost of partnering with Amazon is also considerable, especially if a brand opts to have the company both warehouse stock and fulfil orders.
“I think there’s a trade-off small retailers and small businesses have,” Batistich said.
“One is you play with Amazon to get reach and to acquire new customers. But you do that in the full knowledge that you are going to trade off some control.”
For all the convenience and reach the online marketplace may offer, it’s still in a business’s best interest to cultivate direct customer relations, he added.
“What you’re banking on, is that your very best, your most loyal customers come to you and they come to you directly.
“And that will be your most profitable customer.”
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
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