During 2017, we wrote several blog posts about how the Australian retail landscape is changing.
This month's opinion piece digs deeper into the potential impact of Amazon hysteria in Australia and how pure online plays will impact retail.
Much speculation on Amazon's impact on Australian retail needs to be revised and better informed.
The kind of journalism designed to grab headlines and eyeballs - clickbait.
With Amazon announcing the first distribution centre in Dandenong South, VIC and commencing a recruitment process, the story of Amazon's arrival has shifted onto the next stage - commentary on how our local leading retail kings are preparing to combat a future invasion by "Amazon-proofing" their retail businesses.
High-profile retailers like Aldi, Woolworths, and Wesfarmers have dedicated war rooms with teams and scaled versions of their future store designs and layouts, making some reported information accurate.
It is common practice in the retail industry to use a reality check approach to model various scenarios, testing optimal floor plans and product displays to find a unique point of distinction and improve the shopping experience for customers.
This has been a long-standing method used to enhance shoppers' experience levels and improve the overall retail experience.
There is a lot of disagreement about which categories are most likely to fall first, such as consumer electronics, toys, and entertainment.
The most profound immediate effect of Amazon's arrival will be in logistics - improving the speed and cost of goods arriving to customers or buyers.
We have strongly advocated for greater competition and choice in Australian parcel logistics for the past decade.
A limited-choice industry has yet to grow in efficiency and effectiveness.
You only need to run an online store to see first-hand the appalling performance of logistics companies in Australia.
A day never passes without us having to wear pain and suffering, which the unfortunate and unsuspecting customer also shares.
Remarkably, we operate in some of the world's most livable cities.
Yet, we deal daily with slow, expensive, reckless, dishonest and unjust terms from logistics providers with a collective sense of indifference towards their merchant customers and parcel recipients.
If merchants dare try to improve outcomes for their customers, whether it's service, time or price, the arrogance of freight providers is astounding: "Take it or leave it.........you need us more than we need you".
It almost defies belief; no other market or industry would tolerate such contempt.
Amazon will build their intelligent distribution network, providing "best point sourcing" to enable rapid fulfilment.
They will hire local drivers to operate outside of normal Australian freight conditions to ensure speed and efficiency or risk failure to gain traction.
For our business, our finished products' specialized freshness and volatility will make it impossible to replicate across a wide geographical area.
However, we will find ways to play the game and target faster and cheaper delivery outcomes for our customers.
Amazon is working on this problem with its enormous moves into Organic foods and groceries in the US.
Beyond the transformation of logistics, one of the more fascinating features of watching the influence of a pending Amazon arrival has been trying to understand the strategies of the retail shopping centre giants and their attempts to Amazon-proof their expensive, coveted infrastructure and lucrative income streams from tenants paying premium rents.
It's certainly no coincidence that Shopping Center operators believe the future of retail lies in lifestyle experiences.
They add more food/cafes, hairdressers, movies, and internet services.
Shopping Centre operators have developed these so-called strategies based upon statistical analysis of monitoring tenant turnover - measuring year-on-year growth by category.
But what if their stats need to include important elements, such as a growing tidal wave of angry food operators becoming increasingly frustrated by the increased number of same-category outlets opening in these centres?
Modest foot traffic rises don't stack up when food outlet tenants have increased by 20+% % in many centres.
The pie is only so big, and it's getting cut into smaller slices for food operators trying to make their business work inside large shopping malls.
There has also been a growing number of franchise brands turning away from Shopping Centers entirely or applying pressure to renegotiate the terms of their lease based on the changing landscape of Centre tenants.
Some have taken more drastic steps by placing unprofitable outlets into liquidation so they can exit the lease altogether.
Shopping Centres are losing or downsizing the historical anchor tenants like Department stores - Myers, David Jones's and the normal big ticket items we used to visit malls for are disappearing, like appliances and electronics.
In 2015, we looked at opening a retail store for click-and-collect innovation. It was a first-mover offering back then, and we were seriously excited and keen.
But when we began preliminary enquiries with a high-profile Shopping Centre lease, the Centre's operator dared to demand a cut from all our online sales despite having never invested in building up our business nor contributing to its ongoing expenses.
They made a feeble attempt to justify their claim that customers research online and then make in-store purchases.
They felt entitled to a portion of online sales, whether the orders were for delivery or collection.
One of the best things we did was walk away from that prospect and a few other onerous traps we won't mention here in this blog.
Shopping Centers will always perform well during sustained population and real estate growth periods.
New estates with limited amenities are the hunting grounds for large Shopping complexes, as there is no alternative.
Established suburban shopping strips will continue to struggle as rising rents and diminishing parking availability all contribute to force changes in the usage of spaces - often leading to a re-development of apartments above with minimal/basic retail service on the ground level.
The retail downstairs is often a token gesture to achieve council planning approval.
It will take considerable time for Amazon and other large pure online players to disrupt Australian retail materially, but the changes will be profound and lasting.
The best strategy to prepare for competition is to focus on the customer experience and manage costs astutely.
