Local retailers are adapting their business models in response to Amazon’s entry into Australia’s $300 billion retail sector

INNOVATE or die. That’s the message to local retailers following Amazon’s entry into Australia’s $300 billion retail sector.

Sportitude sports store manager Josh Willoughby, product and merchandise manager Abby Willoughby and online manager Jack Warhurst at the Adelaide store.

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INNOVATE or die. That’s the message to local retailers following Amazon’s entry into Australia’s $300 billion retail sector.

In the end, last week’s long-awaited launch was an anticlimax, with early visitors to the site being offered a limited selection of products offered primarily by third party sellers.

Retail tycoon Gerry Harvey was possibly the most emphatic critic.

“Beautiful, lame duck! Can’t believe how bad they are, but it’s good news for everybody because the hype has been ridiculous and the result has been, well, you couldn’t be this bad,” he told media on the day of the launch.

But Amazon boss Jeff Bezos didn’t build a $725 billion company by getting the customer offering wrong.

And experts predict it’s retailers like Mr Harvey who have the most to lose.

Research from Roy Morgan tips department stores, electronics and appliance retailers to be most at risk from the Amazon onslaught.

Retail tycoon Gerry Harvey.

Amazon founder and CEO Jeff Bezos.

“Amazon succeeds most quickly in new markets where there is already a high level of online shopping,” Roy Morgan chief Michele Levine says.

“The theory is simple — it’s easier to churn someone from an incumbent to Amazon than it is to convince a consumer to start shopping online from a standing start.”

David Jones tops a Roy Morgan list of vulnerable local retailers, with 30 per cent of its customers also shopping online at Amazon. Harvey Norman isn’t far behind with 21.5 per cent.

Australian Retailers Association executive director Russell Zimmerman says retailers have responded to the threat, either by signing up the Amazon Marketplace third-party sales platform or adapting their own business models.

“JB Hi-Fi has already announced same-day delivery and Harvey Norman has said that it’s going to price match Amazon,” he says.

“Innovation is what Amazon is all about and if you don’t innovate you’re going to be left out in the cold — in terms of payment, delivery and all sorts of other services.”

With less than 4 per cent of shoppers buying their groceries online, supermarkets are less concerned by Amazon’s arrival, but they too are responding.

Woolworths is planning to open up to four new “dark stores”, which are closed to customers and used solely to pack and ship online home deliveries.

Meanwhile, Coles is partnering with peer-to-peer jobs platform Airtasker to offer its customers a personalised and flexible delivery service.

For others it’s a case of — if you can't beat them join them.

Adelaide online gift retailer Edible Blooms and local sports stores Joggers World and Sportitude are planning to list their products on Amazon Marketplace in the new year.

“If we don’t do it someone else will,” Joggers World and Sportitude online manager Jack Warhurst says.

“Our prices will be the same as our website and we expect Amazon sales to be around 10 per cent by end of next year.

“With sports stores, online is where we see most growth and most of our resources and attention is focused on growing that — 50 per cent of our sales are now online.

“We’re also trying to get orders delivered on the following business day and we’re really concentrating on being customer service focused.”

While Amazon’s underwhelming start offers local retailers a reprieve for the busy Christmas shopping season, its real impact is expected to take hold next year.

The secret weapon may be Amazon Prime, which offers VIP subscribers free and fast shipping, and which is expected to launch locally next year.

Fulfilment by Amazon, where the retail giant handles distribution and deliveries on behalf of third-party sellers, will also arrive, along with new “fulfilment centres” to support the company’s first site in Melbourne.

“It might take a bit of time but they know what they’re doing,” Mr Zimmerman says.

“They’re very well versed, they’re not Johnny-come-latelies. The crucial thing for local retailers is to innovate or die.”