Will Amazon's arrival change Australian T&L landscape?

By: Rob McKay


The US behemoth’s retail threat makes headlines, two experts look to potential T&L ramification

Will Amazon's arrival change Australian T&L landscape?
Hoy Yen Hooper

 

Amazon’s impending Australian debut has led to a swirl of public speculation and media hype but little there has been said about its likely effect on local transport and logistics.

Certainly, this huge firm’s foray into groceries, Amazon Fresh, put the wind up the stock market, with listed Australian supermarket owners share prices fall on the news

To the experienced eye of CouriersPlease (CP) chief operating officer Hoy Yen Hooper it seems plain that the domestic T&L industry will be challenged to push towards peak efficiency and lowest cost as existing local customers and their T&L contractors gear up to Amazon’s competitive threat.

"I can assure you that there will be changes," Hooper, the former the head of commercial operations at parcels disruptor Sendle and a one-time MD at DHL eCommerce Oceania, tells ATN.

"And I am hoping the retailers and other logistics providers are prepared for that."

When is less clear but Hooper believes a fully-fledged Amazon operation is unlikely to arrive instantly, whether it be this time next year, as some expect, or later.

She points to geographic challenges coupled with a small market and population concentrations that are unlike most of its other expansion countries as meaning it will have to build its presence steadily.

This will mitigate positively for delivery partners that have strong existing networks, a point noted elsewhere when speculation has touched on Australia Post as a possible contender, though Toll and Linfox must be in the frame as well.

"Amazon’s strategy has never been to focus on one single logistics provider," Hooper says, noting its Japanese experience, where it had linked with two or three such domestic firms as it tries to roll out same-day delivery structure – an effort that has proved challenging.

"When it comes into the country, it probably would partner up with an incumbent here to kick-start what they are planning to do."

Later, it is likely to cast its net wider to take in "partners that share its customer-centric view".

Amazon famously uses ‘big data’ and advanced IT to drill into customer desires, so prospective partners will need to be tech-savvy as well as having excellent coverage.

"Amazon’s promises of lower prices and faster delivery times may put pressure on existing local retailers and the supply chain, but I believe we will become better at what we do," Hooper says when speaking of a CP survey conducted in June.

"In the US and UK markets, where Amazon has a large share of the retail market, one-hour delivery through Amazon Prime and competitive prices are being offered.

"In our survey, fast delivery was the least important reason for shopping on Amazon which may indicate that consumers in regional and country areas know that delivery may take longer as it is not commercially viable for many providers to have that sort of reach.

"Amazon will be attracted to delivery services that provide consumers with flexible delivery choices – such as enabling them to pick up at retail outlets such as newsagents, grocery stores and petrol stations – consistency in delivery, and reliability in keeping with expected delivery transit times.

"Consumers really value consistency and reliability: an item that is due to arrive within three days will arrive within three days 90 per cent of the time."

As for CP’s expectations, it is yet to be in discussions with Amazon but Hooper insists it will have an open mind, though whatever is agreed would have to work for both sides.

Mind changer

Industry expert and Ferrier Hodgson Partner Brendan Richards had a sobering message for transport and logistics in what he says is a "VUCA world", based on the acronym currently common in managerial circles for "volatile uncertain complex and ambiguous".

Speedy digital advances and the disruption they support may challenge regular practices but Richards puts the onus on firms not just in the T&L to be awake to change but to act on them.

While acknowledging the difficulty of the task, especially with the likes of "long-term lease commitments on fleet asses and properties and things like that – and it’s very difficult to suddenly reinvent ourselves to be something different just because our customers have managed to do so in a market where, for them, it’s slightly easier to adapt their business more quickly".  

However, speaking at the recent Victorian Transport Association (VTA) annual conference, he sees little choice because "the moment you lose relevance to your customers, you lose your customers".

He notes that inflexibility and complacency amongst incumbent market leaders have sowed the seeds of their downfall.

"Amazon didn’t kill the retail industry in the US, the retail industry pretty much killed itself," Richards says.

The battle for relevance that Amazon represents requires not just skills that are yet to be deep or commonplace in T&L but a change of mindset from being a transport services provider to being a logistics provider.

"If you look at logistics and what it means, and apply that across our economy, it accounts for about 80 per cent of everything we do. Because, at the end of the day, logistics isn’t about the movement of goods, it’s about the ‘function’ of movement.

"And if you understand the function of movement, and you focus on that more than you focus on actually moving things, you start to identify where changes come and where disruptions emerge from and you can start to build a solution to it."

What shoppers want

Couriers Please (CP) intitiated a study by public opinion surveyor Pureprofile of 1,001 Australian adults who have shopped online at least three times in the last six months.

The survey initially explored whether online shoppers currently prefer purchasing from retailers that specialise in a single category, such as fashion or technology, over online ‘marketplaces’, where they can shop across multiple categories from the same site.

Of respondents, 58 per cent preferred to shop from a specialist online retailer than a marketplace.

However, CP says that, "when told that Amazon in Australia will focus on providing low prices, vast selection, and fast delivery, 90 per cent of respondents said they would shop from Amazon".

The survey separated Amazon’s three focuses – prices, selection and delivery – to gauge what was more important for local shoppers.

Lower prices is the main reason shoppers would purchase from Amazon: 68 per cent of respondents cited this as the most common reason.

A wider range of products came next – important to 55 per cent of respondents – while 30 per cent of respondents said fast delivery times is the reason.

Prices were more important for younger age groups than older generations.

Those in their 20s and 30s cited lower prices as the main reason for shopping on Amazon, at 71 per cent and 70 per cent respectively.

This reduces with age, with 63 per cent of 50-somethings and 64 per cent of people over 60 years concerned about prices.

Vast selection was more important for older generations than younger generations with the level of importance decreasing with age.

For people in their 50s, a wider range of product choice would be the reason 58 per cent would shop on Amazon, whereas this was only important to 46 per cent of people in their 20s.  

Currently, 18 per cent of respondents said they purchase from Amazon and will continue to do so when it launches in Australia.

Surprisingly, only 11 per cent of 20-somethings currently shop on Amazon, the lowest of any age group.

This jumps up to 22 per cent of people in their 30s, 16 per cent of people in their 40s, and 19 per cent of over-50s.

Check out the full feature in the August edition of ATN. Subscribe here.

 

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