Throughout the history of retail, one thing has remained a constant: the need to remain competitive. A successful business model today is not necessarily a match-winner in the future.
Being competitive involves mastering a range of factors such as offering a quality product, keeping business costs efficient, as well as maintaining pace with new technologies and business strategies.
Last week a Morgan Stanley report revealed that Amazon is struggling to offer prices that are competitive with local retailers. Since their Australian arrival in 2017, the NRA has constantly stated that the global online behemoth would find business more challenging here than in the US or UK markets.
Extensive transportation costs, Australia’s complex industrial relations system and higher wages are hurdles that Amazon simply didn’t have to jump in the US.
The report noted that Amazon remains overly reliant on shipping items from its US store, while it is also suggested that local suppliers are wary of selling to them in order to avoid Amazon dominating the market.
This example demonstrates that even a large, multi-national business that has dominated one of the world’s biggest markets in the US, is still not immune to the pressure of competition.
One area where the report did state that Amazon is offering cheaper items than local retailers is supermarkets. Incidentally, last week grocery giant Coles announced a deal with British IT specialists Ocado to build two warehouses to boost their online sales by $1 billion.
The system will be run by robots and can deal with both fresh food and dry groceries, replacing jobs currently performed by Coles staff. As with most instances of automation, the move should see staff redeployed to other sections of the business rather than losing their jobs altogether, but the move is certainly a direct result of Coles’ desire to remain competitive.
Meanwhile, Caltex are also looking to invest in innovations aimed at giving it a competitive advantage in the $8 billion convenience market. The company is making new investment in technology to make transactions at its petrol stations and convenience stores as easy as possible. Ultimately, Caltex envisages a future where shoppers simply log-on to their app, order items ranging from groceries to their favourite coffee and upon arrival an attendant provides them with these goods.
All three of the above examples highlight the need for businesses to be constantly monitoring and reviewing ways in which they can best cater to their customer base. Despite having been in the Australian market since late 2017, Amazon is still finding it challenging to navigate the Australian retail terrain in its bid to compete with local retailers, while established nationwide outlets such as Coles and Caltex are refusing to remain flat-footed in order to remain market leaders.
Finally, and on a separate note, the federal government will tonight hand down the budget and the entire retail sector will be watching closely. Measures are certainly needed to kick-start not only retail but the Australian economy more broadly. Next week I will present an analysis of the initiatives that are announced by the Treasurer that are relevant to retail. Fingers crossed there is plenty to spruik!
I hope you have a great week.