Amazon’s much anticipated Australian debut late last year had retailers quaking in their boots and online shopping devotees feverishly awaiting a whole new world of money-spending possibilities. Despite the hype and media-generated dread surrounding the retailing giant’s Australian opening, actual impact on the market thus far seems to have been minimal. But what does the new entry into our vast land mean for the transport and logistics sector? The answer is two-pronged and complex.
Amazon’s success in markets such as the USA and United Kingdom is based on the pillars of big data and customer-centric operations. Simply put, the retailer uses advanced IT and technology to predict customer behaviour and offers a ‘one-hour delivery’ service through the subscription-based Amazon Prime membership. This kind of thing, needless to say, is a challenge in a country as vast as Australia. In fact, Amazon’s launch into other markets such as Japan has proved challenging when trying to implement the same-day delivery that it’s famous for. Already, Amazon has experienced complaints from regional Australia that delivery times are well beyond those advertised, and this is something that won’t be easy to overcome. Much of regional Australia relies on flights for deliveries rather than road networks, and beyond introducing their own fleet of delivery aircraft, shaving time off deliveries to these areas is a difficult thing to achieve.
Engaging with local established delivery partners such as Australia Post means that Amazon is able to build it’s offering slowly, as it navigates the challenges of Australia’s T&L networks. The contract is no doubt a boon for struggling Australia Post, although the success of Amazon will rely more heavily on its ability to offer low-cost products, in the absence of delivery-time advantages. Unfortunately for Amazon, the market was left a little underwhelmed by the prices offered for products out of the new Australian warehouse; and local retailers breathed a heavy sigh of relief. While the introduction of a new large retailer into Australia means an increase in market size for the T&L sector, it also puts transport firms under pressure to perform for their existing clients.
Amazon’s Fulfilment by Amazon (FBA) service offers other retailers the opportunity to have their products packed and shipped by Amazon, thus reducing in-house costs for retailers and resting the responsibility of on-time delivery solely with Amazon. Although the company are yet to establish transport solutions which compete with Australia’s existing T&L firms, their aptitude for big data will no doubt see them use picking and packing times as their main leverage into faster delivery for customers. If nothing else, Amazon’s arrival should have T&L firms within Australia on notice for shifts within the market. The advance of technology for which Amazon is famous will make waves within the Australian sector, and adopting these types of technologies is imperative if local companies are to future-proof themselves against inferiority.
Ferrier Hodgson Partner Brendan Richards spoke recently at the Victorian Transport Association (VTA) annual conference, telling the industry: “The moment you lose relevance to your customers, you lose your customers”.
He also drew on the experiences of the USA, explaining that Amazon did not destroy the US’s retail industry, but that complacency and inflexibility of the market leaders lead to their own downfall. The same message should be loud and clear for Australia’s T&L market. Although Amazon will need time to build its game-changing delivery networks, there is no doubt that they’re going to shake things up.
Now is the time to invest in the development of technologies which will allow firms to compete with Amazon – lest they be left behind completely.