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Why Smaller Retailers Will Have The Edge Against Amazon

Even before Amazon came out and “announced” it for themselves, the arrival of the United States’ biggest online retailer has cast a long shadow over the future prospects of the Australian retail channel.

Of course, with every crisis comes opportunity. As the concerns of local retailers shifted from whether or not Amazon was coming to the question of how to stay competitive once it does, local startup Neto made it’s move.

Styling themselves as “the most successful start up that you haven’t yet heard of” and backed by Telstra, Neto are a retail management platform that empowers retailers to sell everywhere – from retail to digital  to timed pop up stores.

According to CEO Ryan Murtagh, the company is all about modernizing the omni-channel experience for retailers.

He says their client-base “ranges from really small mom and pop operations to major retailers like Anaconda.” In fact, in Australia, the company are involved with over 3000 retailers.

From a company that began as an online store on eBay, assisting 90 retailers in selling their product in the online space, Neto now processes over $1.5 billion in sales through their platform.

Speaking with ChannelNews, he’s surprisingly upbeat about the pending arrival of Amazon.

“This is something we’ve been waiting for for a really long time,” he says.

“I think it will bring a lot of Australia online,”

He says Australia is behind the curve compared to other countries when it comes to online shopping and that the arrival of Amazon will help bring about a mass adoption of online shopping and a better customer experience.

Speaking bluntly, he says that “retailers in Australia haven’t adopted what’s available in terms of technology and if they don’t these bring brands that are coming on-shore are going to become very hard to compete with.”

“It’s going to be a very different environment from a retail perspective,” Ryan predicts.

“What makes a successful retailer is going to change and I think that’s a good thing for everyone at the end of the day.”

However, he notes that it’ll be better for some than others. More specifically, Smaller firms will have an edge here when it comes to making the transition.

“They’re far more agile and going to be able to adopt new technology very quickly and change their business model to either be an Amazon retailer or compete against Amazon,” he says.

While “the big guys” will eventually catch up, Ryan claims there’s a great opportunity for the smaller companies to focus on a niche and really compete in the meantime.

“Australian retailers should invest in building up back-end capabilities that directly influence what they can offer customers if they want to gain a competitive edge, rather than giving in to price pressures and undermining their future profitability.”

“The profitability is exceptional” when it comes to owning a niche, rather than being “everything to everyone” – a position already held by the bigger retailers.

Ryan also downplayed claims that online-only players in the market like Kogan and Catch of the Day would be hit the hardest by Amazon. He says “those guys have a real head start,” praising their back-end systems.

What’s more, he struck back at the idea that once Amazon arrives, it’ll be an all-out race to the bottom on price for retailers.

“I think there’s a lot of evidence of very successful retailers in mature Amazon markets that have been successful on Amazon and not competing on price.”

“They’re competing on service [and] delivery,” he says.

He emphasises the importance of the Amazon “Buy” box, and the role that providing a solid customer experience plays in that.

“Amazon itself doesn’t need local warehousing, inventory, and customer support to sell to Australians. They’re investing in these because they recognise the value of having local back-end infrastructure that can provide fast, flexible fulfilment to customers, further improving a value proposition that’s already proven immensely successful the world over.”

“Brands can no longer expect to stand out by offering ecommerce capabilities: our research found that 52% of consumers now expect every retailer to offer their own online store,” said Murtagh.

“The real points of differentiation now come from how effectively they can manage inventory, logistics, and support services like after-care and returns across numerous channels, and the extent to which they can use these services to give consumers the choice and convenience that they’re after.”

Murtagh says that “we’re already preparing to launch our Amazon plugin that will add the marketplace to the range of payment, accounting, and last-mile services with which our platform is fully integrated, helping our customers manage cross-channel complexity with minimal fuss.”

In fact, the company already have a long list of 405 retailed signed on to be Amazon-ready from the day the website launches in Australia.

“If price is your only focus, you won’t win,” he says.