The threat: As discussed in part 1 of this series, the recent entry of JD Sports, confirmation of Kaufland’s intent to come into Australian shores (owner of Lidl) and announcement of the eCommerce juggernaut Amazon’s entry into Australia, will fundamentally redefine the retail playing field. The challenge: It is our opinion that ultimately, retailers can maintain advantages by refocussing their efforts rather than going head-to-head across their entire product portfolios. To do so, there are multiple ways retailers can prepare themselves: a product/service portfolio review; customer experience improvements; and a channel strategy review, reflecting the three frontiers Amazon will directly challenge businesses on beyond pure scale and cost efficiencies. In this post, we will focus on the first two of these responses. The short term tactics: Given the reasonably short time frame to Amazon’s expansion in the Australian market, we have collated a set of short term tactics that aim to mitigate the impact of the impending disruption. These tactics are not a replacement for the long term, transformational change that will be required to successfully compete going forward. It’s not as bleak a future as some predict, and some retailers have been very successful in the Amazon era, but competing in the Amazon era will require a different set of strategies than what made retailers successful until now. Product/service portfolio review: Amazon’s sales skew heavily towards commodities. They will establish a market place that makes these products extremely accessible to consumers. You will be competing on price. If you can’t win, don’t play. As a retailer in the Australia, you should be asking yourself: what should we keep in our product range and what should we kill off? What you need to do: Audit your opportunities: take stock of your current product/service portfolio and honestly assess if a) you can offer the lowest price; and b) if there are a lot of competitors offering this product, who will aspire to offer the lowest price. Product differentiation between the channels: ‘Amazon Only’ offerings give you new freedoms to cater to specific markets and is an excellent way to test for new products, or drive volume based synergies (i.e. increasing utilisation of manufacturing sites). This allows you to gain access to Amazon’s huge customer base. The Amazon offer may be “no frills”, while your direct to consumer offering may include additional service, support, warranties and other relevant add-ons. Customer experience improvements: As mentioned in Part 1, Amazon’s vision is to “be earth’s most customer-centric company“. Amazon may be online only, but they are single minded in their focus on customer experience and providing the best shopping experience. They don’t just sell stuff, they go out of their way to help customers make purchase decisions – negative product reviews may impact sales but they contribute to credibility and customer ‘trust’ in the marketplace. They will strive to own the customer as much as possible. That being said, Australian retailers do retail several “incumbent advantages”, for example: Australian consumer preferences differ somewhat from other countries, and while Amazon does have some retail presence in Australia, their operating experience in this market is limited compared to others There are practical challenges in developing last mile delivery capabilities (particularly in Australia), and it is unlikely that Amazon will be able to bring an entirely new delivery capability to market before the 2017 Christmas peak. As a retailer in the Australia, you should be asking yourself: how do we provide a better service to our target customers (that neutralise Amazon’s service advantage)? What you need to do: Understand your customer: Who are they? What do they want? How do they like to shop? What is your value to the customer? You can’t implement a customer focus if you don’t know what to focus on. Provide additional delivery options to your customers: Offer different levels of service (from same day to ground), in a hassle-free ordering and delivery process. Tier your service delivery to cater to different needs and wants of your customer e.g., add same day or overnight convenience options, which may be a critical requirement for some of your customers. Leverage data: Make sure you consider how you can leverage data to develop greater customer insight, test and improve advertising, continuously refine your branding, personalise your service and help shoppers in real time with product selections based on browsing and buying history.