Amazon’s US Growth a Dire Warning for Australian Retailers

This article was originally posted by Booodl CEO & Co-Founder, George Freney, on LinkedIn.


Make no mistake: Amazon is coming and when they hit Australian shores retailers will need to be ready. Numbers published this month by financial firm PiperJaffray provide insight into some very scary growth that will undoubtedly be the nail in the coffin for many physical retailers – unless they start preparing their defenses now.

Stores have been slowly leaking sales to online for quite some time and nowhere is this more evident than in the US. Fortunately, Australia has been somewhat immune,. But with the recent announcement that Amazon is launching Alexa and Echo in the UK and Germany, Australia can’t be far off.

Coming to a Fulfilment Centre Near You

According to PiperJaffray analyst, Gene Munster, Amazon now has a warehouse or delivery station within 20 miles of 44% of the US population. That’s up from 38% in 2015 and 26% in 2014! And it doesn’t stop there: Amazon will continue to expand its reach, getting to roughly 80% of the population (100% isn’t likely as there are parts of the country that don’t have high demand for online deliveries). But a whopping 80% is in their future, and if physical retailers don’t catch up in the convenience stakes, their future will be grim (if they exist at all).

Let’s take a look at the numbers:

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Where’s it all going? Having closer proximity to US consumers means it takes Amazon less time (and money) to deliver, resulting in growing same-day and same-hour deliveries. It’s a huge selling point for their very loyal Prime users – estimated to be 69 million.

But let’s take a look at the potential for physical retail: if you could search and locate the product you want nearby, easily and accurately, we’re talking about a 10-minute process. That’s better than same day delivery and it’s better for the world: no unnecessary packaging and delivery trucks, just a slick search engine and store directory. More on how we’re tackling that at Booodl shortly!

The Physical Retail Ecosystem v the Amazon Echo-system

A look at Amazon’s growth isn’t complete without a mention of Alexa and Echo, Amazon’s intelligent voice assistant and hands-free speaker, and the rise of voice search. It’s the fastest growing type of search with 55% of teens and 41% of adults using it on a daily basis.

A great article from Venture Beat this month looked at how voice search is transforming commerce. They discussed the most recent Google Mobile Voice Study finding there’s been a 61% growth in longer queries that start with “who”, “what”, “where” and “how”. One in five queries on the mobile Google app are voice-based and they get about 30 times more action queries by voice than typing.

The implications of chatbots and voice search on shopping are huge, according to Lucie Greene, worldwide director of the Innovation Group, J. Walter Thompson’s trend-forecasting consultancy and innovation unit:

“The two-way interaction in commerce and the fact that it’s an audio conversation also makes shopping feel more experiential… It makes infinite situations shoppable for the first time. Instances where you would be cooking and unable to shop or driving and unable to use a service are now connected to commerce. They essentially make your life more shoppable.”

Amazon are already way ahead of the game when it comes to voice search.

Echo and Alexa work incredibly well and have taken a large chunk of the product search pie from Google already. Last week, Amazon announced that Alexa and Echo will be rolling out to the UK and Germany. Next up: going global. Once consumers start speaking to Alexa, they’re lost to physical retailer ecosystem and immersed in the Echo-system. The interplay with the Amazon prime service where delivery costs aren’t an issue and payment/fulfilment details are known, adds to the Alexa lock-in effect.

Soon the world will be talking to Alexa.

For physical retailers, getting ahead of the game now is crucial and voice search can’t be underestimated. Making it as easy to ask Siri where you can find a store selling what you want, as it is to order via Alexa, will be key.

Convenience is king

Amazon is dominating and Alexa is a huge part of their online sales growth. The way to beat them will be to make sure shoppers don’t go there in the first place by making physical stores as easy to find as Alexa does buying products. Even make your physical store discoverable on Alexa!

What would the implications be for Australia if physical stores don’t increase their discoverability now? Figures released this week by Citi show the the impact on local retailers if Amazon set up shop here. And it’s not good:

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Citi estimated Amazon could reach 3.5-4 billion in revenue (14% of online sales and 1.1% of all Australian retailing), with JB Hi-Fi and Harvey Norman being the heaviest hit.

According to PiperJaffray the growth of Amazon means that going to the store could become a thing of the past. We don’t buy that for a second. Thriving physical retail places are essential for communities – no one wants a future with empty high streets and everything being delivered by drones. With a little Store Discovery Optimisation (SDO) we can ensure physical retail continues to thrive.

SDO – much like SEO for physical stores – is all about making physical retailers more discoverable, thereby driving shopper visits and sales. That’s what we’re working on at Booodl: helping retailers be optimised for discovery by shoppers searching location centrically. Booodl also makes Google work better for shoppers and retailers, so it’s as easy to find what you want offline as it is online – whether you’re searching on Booodl or search engines.

Register for Booodl today to increase the discoverability of your store, brand or mall.

About Booodl

Booodl is a physical store discovery service making it as easy for shoppers to find the right store selling what they want. Consisting of a search engine and comprehensive store directory, Booodl also helps stores drive shopper visits, enables brands to increase the discoverability of their stockists, and makes sure malls continue to thrive by driving footfall and store visits. http://www.retail.booodl.com.

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