5th December, 2017
Amazon’s here now (officially), and yet the sky remains firmly in place (so far)!
While most analysis around about Amazon’s arrival is about its potential impact on big retailers, the impact to small business owners could be earth-shattering.
Customers are already pretty excited. According to fresh figures from Nielsen, 4.6 million Australians accessed Amazon’s US site during October as the hype built.
Depending on whom you believe, the arrival of the internet juggernaut either spells the end of retailers big or small or just gives them another channel to sell through.
We’ll start to see all of this play out soon, of course, but in the meantime here are a few reasons for optimism – and a few for pessimism.
The arrival of Amazon and its fulfilment centre in Australia could be a real game-changer for savvy small businesses with great products.
It could also give small business owners a reason to examine their practices and try some new things.
Small businesses can now (for a monthly fee) be visible on one of the world’s largest online sales platforms.
It adds another channel to sell through, in much the same way that delivery third parties such as UberEats and Deliveroo have given restaurants and cafes another avenue to sell through.
There’s a reason why Amazon has succeeded, and price is only a part of it.
The convenience of services like Amazon Prime have shifted expectations of what customers want from retailers – namely, fast and efficient service.
Customers will now start demanding and expecting different things, and retailers who adjust to the brave new world by doing things like looking at their delivery options and online service will be best-placed to survive.
The thing about Amazon is that it’s a big, faceless internet company (no matter how much they try to make you think otherwise).
As people interact with this faceless entity more and more, they may come to miss the face-to-face interaction that comes with shopping at a small business.
Small businesses that double-down on things like friendly customer service and local knowledge will be able to play up the fact that they’re very much human.
Amazon runs on scale and margin, two areas where smaller business owners just can’t compete.
If those become the things customers judge a business on, that may bring some headaches down the track.
“Your margin is my opportunity” – Jeff Bezos
Amazon can offer steep discounts because it sells at a massive scale. It’ll be able to do so in Australia too because it can afford to eat a few years of losses until it’s entrenched in the market.
Even if it doesn’t start discounting, you can bet other big retailers will do so in order to head off the Amazon threat.
For small businesses with razor-thin margins, that’s not great news.
If customers become price-focused, then those margins will start to come under real pressure as supply/demand dynamics start to work their way through the supply chain.
With Amazon selling at a discount, bigger retailers may price-match in response.
They have some capacity to at least compete, but if the whole market moves down in price that’s not great.
While a small business may have a small price premium attached to their products, the trade-off has always been that they’re a local operator – so it makes sense to spend a few more dollars there than at a big retailer.
But if the difference between the price offered for a similar product at a big store against a small one widens – then the price premium will go up.
What value do people put on ‘keeping it local’ – and how much will they pay for it? We’re about to find out.
While having access to the Amazon marketplace is a good thing, becoming over-reliant on one sales channel is a terrible idea.
It’s even worse if you have no real control over that channel.
If your business starts to get 20 percent, and then 30 percent, and then 50 percent of its sales from one platform, that’s a sure-fire sign that you don’t have a diversified sales channel strategy.
The best approach is to make sure no one sales channel is dominant.
Do you think Amazon will be a boon to small businesses, or the worst thing since un-sliced bread? Head to our Facebook page to let us know!