Justin Braitling, Watermark Funds Management’s chief investment officer, was quoted in the Australian Financial Review following a special briefing by Amazon.
He explained the online retailer is planning to establish distribution centres around the country, as well as real stores, in an attempt to capture a substantial share of the markets in which it intends to compete.
Amazon has very deep pockets and the ability to undercut the market to buy market share. Moreover, it was one of the pioneers of same-day delivery. As a result, most US consumers now expect the businesses from which they buy products and services, to offer the same level of service.
One of its businesses, Amazon Prime, offers deliveries in the US within two hours. While it’s not known whether it plans to offer the same service here, local retailers must assume it will at some stage, even if it does not roll out Amazon Prime initially. Amazon has also been a pioneer of drone deliveries, especially across the UK.
Whatever approach Amazon takes to distribution, it’s likely to completely disrupt the Australian supply chain and logistics sector. Local businesses must be able to provide the same level of service to effectively compete.
While it’s easy to view Amazon’s arrival in Australia as a threat, the best retailers and other businesses in the markets in which it competes will view it as an opportunity.
Amazon’s arrival means many local businesses will need to rethink their business models and become accustomed to a world where margins are much slimmer.
One way to do this is by investing in plant and equipment to make operations more streamlined and productive. But, in an environment where the margins are being squeezed, purchasing equipment may not be the most economically viable option.
Instead, companies can access funding via independent capital providers to obtain the assets they require. This way, they can make the most of their long-term available capital to invest in growing their overall operations.