The arrival of Amazon has forced retailers to rethink their e-commerce strategies. They have to spend billions of dollars on platforms and marketplaces, fulfilment centres, data analytics, and digital marketing.
This investment has allowed retailers to avoid getting caught off-guard by the rapid shift in consumer spending.
During the pandemic, e-commerce sales were up significantly, reaching over 15% of total retail sales. Before Amazon’s arrival, this had been at around 4%.
In December 2017, Amazon launched with over 7.5 million products in 23 categories. Its initial launch was regarded as lackluster, and its pricing has been more rational over the years. This has allowed retailers to benefit from the company’s investment and maintain their market share.
Amazon is expected to gain a larger share of the e-commerce market due to its massive distribution capacity. This year, the company doubled its warehouse space to over 330,000 square meters. It also expanded its product range by 60% to 200 million items.
Despite the recent decline in online sales at omnichannel and pure-play retailers, analysts believe that Amazon’s sales in Australia are still expected to grow by double digits. In 2021, the company’s sales in the country were almost $2 billion.
The gross merchandise value of Amazon is estimated to be around $2.6 billion, which is significantly higher than the value of products sold on marketplaces such as Catch and Kogan.com.
Over 14,000 Australian suppliers have started selling their products on Amazon.com in Australia. However, analysts noted that there are still areas of the site where it can improve its offerings.
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Despite the decline in online sales, Amazon Australia is still expected to grow. In addition, some retailers, such as local e-commerce company Kogan.com, are cutting down on costs.
To fend off Amazon.com, local retailers will need to increase their product range, improve their fulfillment capacity, and reduce their delivery times. They’ll also need to sharpen their pricing to attract more customers.
According to analysts, local retailers will also need to step up their efforts in terms of loyalty programs and content to attract more customers. They noted that the company’s Prime program has become a key factor in the success of Amazon in Australia.