Amazon launched in Australia in Dec 2017 to what some people have said is an ‘underwhelming ’ launch. Whilst this might appear to be the case, it should be noted that Russell Grandinetti, Amazon SVP of International Consumer, has said, “Our launch in Australia was the largest order volume on a first-day country launch that we have had in our company history, which is extremely gratifying.” It is a little early to tell how financially successful Amazon Australia will be, but there is no doubt the Amazon has already impacted how businesses sell and deliver.
Before the Amazon’s launch in Australia, there were rumours in 2016 that Catch.com.au were getting ready for an IPO. That didn’t happen and what transpired instead was a rebrand and the launch of a marketplace to become a one-stop shop for online shoppers. They also invested $20M on an automated warehouse system. Sound familiar?
From what started as an online bookstore, Amazon has grown into a powerhouse that has completely disrupted the retail marketplace in just a couple of decades. This disruption is being called the “Amazon Effect.” It’s so widespread that if you search the term, you’ll find 174 million hits. And, as Amazon sets its sights on more and more industries, the “Amazon Effect” is beginning to be felt by wholesale distributors as well. This leaves many wondering how best to adapt to keep customers happy, preserve market share, and grow in a changing world.
But, before we get into that, let’s look at why and how an online store has had such an impact on not just other retailers but every business.
What is the Effect and Why Does It Matter?
It all comes down to a quote from Amazon CEO, Jeff Bezos.
He said, “Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align.”
It’s the holy grail of what Amazon is about. They unmercifully invest into their company in order to improve the customer experience in four key areas: innovation, choice, convenience, and value.
This has brought about an unprecedented expansion. Amazon now has fleets of planes, trucks, bicycles, robots, drones, and more. They have massive warehouses and distribution centres across the nation and are even using crowdsourcing to do deliveries (think Uber for Amazon).
And, the “Amazon Effect” is accelerating change across all distribution: New forms of transportation and delivery. New levels of service. Reconfigured warehousing to boost efficiency.
The effect is huge.
What Wholesale Distributors Can Expect
We’re already seeing the effect in wholesale distribution. When it comes to shipping and delivery speed, customers want their shipments faster. They want to be able to call you at 8 a.m. and receive their order by 4 p.m.
An e-commerce site alone is no longer enough. Customers are looking for improvements in ease of ordering. They want sites that are mobile-friendly, the ability to order by text, and the support of a chatbot.
These customers are now comparing their experiences relative to Amazon and expecting the same frictionless and immediate buying journey.
What does this mean then for you as a wholesale distributor?
Distributors will no doubt face a number of potential negative effects from the shift.
Amazon has conditioned buyers to purchase smaller quantities more often and receive their shipments more quickly. But, as wholesale distributors, more frequent orders, more deliveries and smaller drops can erode profits.
The average cost per stop is the average cost per stop. If you deliver less per stop more frequently, profits go down.
Wholesale distributors will also need to be prepared for the need to make changes in vehicle configuration to become more efficient as well as face the real possibility that drivers may not be able to adapt. Some drivers will simply leave the workforce. Some won’t want to have more touches. Others won’t be willing to play a more customer-service oriented ambassador role.
Finally, wholesale distributors will be increasingly forced to move to the Amazon model of mini distribution centres as kilometres per asset goes down.
What You Need to Know to Thrive
Luckily, there is still time to make changes. Distributors can adapt to the Amazon Effect, but the time to start is now. Begin by investing in technologies that solve customer problems and improve the customer experience. Work to solve the issues they have every day, including the ones they may not even know about themselves. And, finally, innovate by leveraging technology that gives your customers what they’re looking for. Because, if there’s anything that we’ve learned from Amazon it’s that the customer experience is the key to success in today’s world.
Parts of this article have been republished courtesy of Omnitracs, Market Motion are key Strategic Partners of Omnitracs.