by Joe Heath
Towards the end of last year Amazon announced it would finally be joining the Australian market. This immediately sent shockwaves up and down the retail sector, and with good reason too; Citibank analysts predict Amazon could capture at least $4 billion of the $222 billion retail sector within five years of rolling out its services.
As reports continue to emerge suggesting Amazon’s launch into Australia could be spearheaded by its grocery delivery platforms and store, Amazon Fresh and Amazon Go, Jeff Bezos has once again confounded industry pundits.
Bezos has long remained an enigma to business analysts. Many of his decisions appear to defy conventional business logic, such as running Amazon at a loss for the last two decades, or launching a bricks and mortar bookstore just as bookstores were fading from the high street.
Amazon’s reluctance to charge into the Australian market is understandable. Firstly, there is the obvious geographic issue of a small, sparsely distributed population across a large land mass, a factor which even Amazon’s famed logistical prowess would struggle to find a profitable pathway through.
Then of course there’s Australia’s digital immaturity. In 2016, e-Commerce accounted for approximately five per cent of all retail sales in Australia. This, when compared to the UK’s 16.8 per cent and the global average of nine per cent, explains why we might not have been top of Amazon’s expansion shopping list.
Despite these barriers, why has Australia suddenly become a viable market for Amazon? One of the possibilities is that Bezos believes his company can alter one of those factors. The launch of Amazon Go might just represent an audacious effort to rewire cultural patterns of behavior and increase the nation’s propensity to buy more goods and services online.
It’s not the first time that companies have launched products designed to manipulate the fabric of a market and create more favourable operating conditions for their business. We call this practice culture busting because it’s reminiscent of ‘cloud busting’, a process whereby cloud formations can be dispersed to create favourable weather conditions.
Google Loon and Google Fibre are great examples of culture busting. The former designed to bring more of the globe online and latter to deliver superfast internet speeds to geographical areas. Both offer little in the way of immediate financial returns, instead they’re intended to create a more beneficial environment for Google’s core business.
Amazon Go might prove to be an enormously profitable arm of their business, but given the low margins in the groceries category, it’s unlikely this is a short-term play to swell Amazon’s coffers.
More probably, it’s that the grocery market is the ideal setting to start nudging the nation’s online shopping behaviours in their favour. If Amazon can stimulate more Australians into buying their groceries online, then they might be able to break down the cultural barriers to buying a wide range of other goods and services online.
But why a bricks and mortar store? Amazon would struggle to influence widespread behavior with only its online delivery platform, Amazon Fresh. This is a country where online grocery shopping still lags behind the rest of the world. Currently only three per cent of Australians do any grocery shopping online, compared to 12 per cent who do the majority of their grocery shopping online in the UK and 47 per cent who have ever bought their groceries online. Aussies are unlikely to start buying their groceries online from a brand associated with books and electronics.
This is where Amazon Go comes in. Amazon Go isn’t your run of the mill grocery store; it’s an online shopping experience in disguise. It’s is a checkout-free store that uses the same technology found in self-driving cars, which automatically detects when products are taken from the shelves. This allows customers to grab and go, charging their purchases to their online account shortly after they’ve left the store.
While its conventional store environment will lure the traditional shopper inside, the digitised shopping experience will begin the subtle process of rewiring entrenched shopping behaviours.
Amazong Go will discreetly deliver millions of Aussies into the hands of Amazon’s sprawling digital ecosystem. From here the company’s algorithms will begin anticipating customer needs and delivering the kind of personalised offers that only the iron willed will be able to resist. Slowly but surely, Amazon will cultivate a legion of reimagined and loyal digital shoppers. They’ll also have altered the cultural fabric of the marketplace and created more favourable conditions for the rest of the business in one fell swoop.
Amazon will continue to confound the business community, but then Bezos has never let that get in the way of his masterplan; and if the company’s culture busting strategy proves a success, there will be very little that can get in the way of their path to total Australian retail domination.