The arrival of Amazon’s marketplace in Australia could propel smaller retailers to great heights if they can capitalise on the first-mover advantage.
That’s the view of Ryan Murtagh, CEO of Telstra-backed ecommerce platform Neto.
“Amazon is one of those marketplaces where the first-mover advantage is critical. What this really means is it’s a great opportunity for small retailers to get ahead of the big guys that are going to take time to leverage these new channels,” Murtagh told Which-50.
Neto has been working with Amazon to build an integration from its retail management software into Amazon’s marketplace which will allow retailers to sell through Amazon while managing operations from their centralised commerce platform.
Murtagh said smaller retailers will be able to set up shop on the platform quicker than larger retailers — many which still don’t have a strategy in place to deal with the Seattle giant’s expanding Australian presence.
The head start will allow the early adopters to accumulate history and positive reviews which ultimately determines their ranking in Amazon’s search results. This has the potential to turn niche retail brands into sizeable businesses, Murtagh said.
A similar phenomenon occurred around a decade ago when pureplay online retailers like Kogan and Catch of the Day used eBay sales to grow into serious retail operations in their own right.
Pick a Strategy
When developing a strategy that addresses the arrival of Amazon retailers must make a choice: sell through Amazon’s marketplace or compete with Amazon. Both have implications for retailers, Murtagh said.
“Regardless of whether you compete with or sell on Amazon it’s critical that retailers have a strategy and a platform or technology that allows them to do either one of those two things.”
Competing with Amazon means retailers must have the technical ability to deliver the same if not better customer experience to their customers as Amazon.
“In many ways what makes Amazon great is they deliver a really great customer experience. I think there are a lot traditional retailers in this country today that aren’t delivering a fantastic online experience. The only way they are going to be able to do that is by digitising their operations and surfacing their inventory wherever their customers are,” he said.
That’s likely to be a hard ask for many retailers running legacy systems.
Murtagh said he is amazed by the processes and systems retailers are still using to track inventory, profitability and “ultimately success.”
“For many years Australian retailers haven’t really had to worry too much [about their systems]. They’ve been able to get by without that upfront investment in technology to automate and streamline their businesses,” he said.
But choosing to sell on Amazon isn’t without risk.
“If it’s not efficient for a retailer to sell on Amazon ultimately they will fail through Amazon because they will have stock outs, they won’t be able to deliver on time for Amazon’s customers and that will impact their rating on Amazon which ultimately means their listings won’t be surfaced,” he said.
The other question retailers need to consider is how selling on Amazon will impact their existing sales channels. Murtagh recommends retailers develop an Amazon-specific strategy keeping in mind volume and profitability.
“How you tackle Amazon might be very different to how you run the rest of your retail operations.”
For example, one strategy is to identify a gap in the Amazon marketplace and only sell a limited number of stock keeping units (SKUs) at a high volume.