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Amazon Set To Dominate Over Local Retailers At Christmas

Things are aligning for Amazon to increase their hold in the Australian market through Christmas, at the expense of local traders. And it all stems back to delivery systems. Australian retailers have had to change business strategies as a result.

With online trading here boosted due to in-store trading restrictions via the pandemic, Amazon – the world’s largest online retailer – were always set to benefit.

Australian consumers with an eye on the troubled retail sector tended to stick to solid brands, which saw the likes of The Good Guys and Harvey Norman stay strong in the appliance space, but Amazon also benefitted.

When Amazon launched here four years ago, they saw their key in concentrating distribution systems in major population centres, then setting up the best low-cost delivery system.

They saw the best way to do this was what was described as an “Uber taxi system” of indie contractors, supporting enterprises using its flexible systems.

Meanwhile, Australian retailers mostly stuck to Australia Post, which seemed reliable for the most part. But that has all changed.

The watches scandal which saw Australia Post CEO Christine Holgate removed was the start of a decline in what was an enviably dependable service.

With long delays in parcel service, Australia Post no longer seem reliable to retailers, especially at a time when parcel traffic is much higher – and an expected increase in the lead-up to Xmas.

This means retailers have been severely impacted. With Australia Post hit hard, their service has deteriorated while they try to clear a backlog of parcels.

At the same time, transport unions see the increase in parcel activity as a gateway to higher pay and lower productivity due to less use of flexible casuals. If successful, this will increase the cost gap between Amazon’s distribution system and large operators like Australia Post, DHL and Global Express.

Some retailers are trying to defend themselves against Amazon’s dominance by ensuring their outlets have online distribution power, then hiring private contractors for deliveries, who usually use an independent contracting system.

Retailers taking this approach are remaining buoyant, with successful deliveries.

Another way Amazon are ahead, though, is they are one of China’s biggest customers, which allows them to take advantage of local retailers having trouble sourcing product overseas.

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