Amazon’s Australian warehouse is finally open: so what?

Posted by Contributed opinion piece by Allen Roberts, Strategy Audit on 27th November 2017

So, Amazon opened its first fulfilment warehouse in Australia last Thursday, to the sounds of the incumbent retailers either telling us that they will have no effect, or just not acknowledging the appearance of a giant shadow on the landscape.

Back in 2015, Whole Foods founder John Mackey waved off Amazon, observing that groceries were a step too far for them. Pity for him he was absolutely wrong, and now works for Jeff Bezos.

Does that sound like Gerry Harvey recently?

It seems to me that the most valuable warehouse Amazon has is not  the new behemoth outside Melbourne, but the data warehouse that has been capturing our digital footprints for the last decade.

Last Christmas, my wife of 35 years was moaning that she did not know what to get me, while Amazon was regularly making suggestions of things I might like, and they were usually pretty good suggestions based on the data they collected. In one sense at least, Amazon knows me better than my wife.

Scary, but just another example of the value of data. Via Amazon Web Services, the biggest in the cloud services business, and growing like crazy, Amazon has their hands around the throats of a huge pile of data on all of us. Add to that the data Facebook, Linkedin, Pinterest, Twitter, and all the rest have on us that can be leveraged, and the world of boring old retail in a shop is no longer.

Harvey Norman has a current market capitalisation of $A4.3 billion, Coles about 18 Billion, and Woolworths 35 Billion, and all are struggling. Amazon has a current capitalisation of almost $US1.6 Trillion, (a trillion is a million, million, I had to look it up to be sure) and rising steadily. Amazon is more than a huge retailer, it is a collection of businesses and dreams that spans a huge range of activities and interests of Jeff Bezos, who has built this giant in 21 years from a simple book selling landing page in 1996.

We always think about on line as being about convenience and price, but it is more than that, it is an immersive experience, we are becoming ‘digital natives’. Our addiction to the screens and devices is advancing at a rapid rate. Nir Eyal documents the means by which we become ‘addicted’ to technology, but as a suggestion, ask your teenager to switch of the notifications on their phone, and there would be a revolution.

So, digital has become immersive, but that is what Bricks and Mortar retail currently has as their primary competitive advantage, you can go in, and touch, feel, try on the stuff, it is a tactile experience.

What will happen as AI and VR explodes onto the scene, you may be able to try on clothes at home, change sizes, colours, combinations, how immersive will that be??

The reality is that Amazon could buy Woolies and Coles out of petty cash and barley notice the bump in their cash flow. The same could be said about Alibaba, China’s answer to Amazon, that is in fact bigger on most measures, but is an entirely different business model, so is unlikely to venture into the space Amazon is carving out.

Last Thursday was no more than just another day, the opening of Amazons warehouse, just another small brick in the wall Amazon is building. We all knew the opening was coming, but it is just that the pace is picking up, and the retail incumbents are being left behind, as our lives change.

 

Allen Roberts is a guest contributor to Australian Food News and writes another of his regular articles here. He is the Director of Strategy Audit www.strategyaudit.com.au and has worked in the food sector for more than 35 years. To read his full biography click HERE.

 

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