Are e-retailers too complacent about Christmas?

Published on the 23/11/2018 | Written by Jonathan Cotton

e-retailers vs Amazon

Judging by the buoyant mood you could be forgiven for thinking Amazon’s retail revolution has been called off. But not so fast…

What a  difference a year makes. This time last year retailers, particularly in Australia, were making grim predictions based on Amazon’s recent touchdown in the country. Now, according to the Deloitte Retailers’ Christmas Survey 2018, the Aussie retail scene is brimming with Christmas optimism.

According to Deloitte’s report, the vast majority (80 percent) of Australian retailers are looking forward to higher sales this holiday season than last, with 41 percent predicting growth of five percent or higher.

It’s good to know someone’s feeling optimistic, because that sentiment to isn’t shared across the Tasman – despite good reasons to be hopeful.

“As we head into Amazon’s second Christmas in Australia it might be unwise to imagine the threat gone.”

According to the BNZ’s latest Online Retail Sales Report 2018 New Zealand’s total online retail spending in September was 11 percent higher than during the same period last year. Spending at local online sites is up 15 percent and spending with international merchants is up seven percent compared to September last year. Based on historical trends those numbers will likely translate to even higher growth in the jolly season.

But Kiwi online retailers don’t seem to be feeling their buzz yet: The ANZ Business Outlook Report from last month found that 37 percent of respondents expect general business conditions to deteriorate in the year ahead, with the retail sector specifically the least optimistic out of all categories.

But perception is a fickle thing. Even ANZ wondered aloud if it could all be in our heads at the time: “The New Zealand economy is delicately placed,” says the report. “Fiscal stimulus and the high terms of trade will provide impetus to growth, and the external environment remains favourable. But with businesses in a funk, it’s fair to say that the road ahead is looking less assured, and risks of a stall have increased.”

Consumer confidence seems solid, the report says, but low business confidence all too often can become something of a self-fulfilling prophecy.

In fact the Kiwis are sounding a little like their Australian brethren did this time last year, when the arrival of global e-retail megalith Amazon was threatening to wipe out Australian retailers across the board.

‘Amazon will do incredible damage to Australian SMEs’ said Dick Smith, chain-store founder turned retail guru, at the time, commenting that Amazon will make an ‘absolute fortune’ in the Australian market and be ‘completely ruthless’.

Retailers were worried – with vendors encouraging the worry – with many scrambling to reinvent their online presence before the arrival of the e-commerce juggernaut.

A year on the tune has changed and after 12 months of sharing the market with Amazon, Aussie retailers seem unfazed. Eighty-three percent of Australian online retailers are predicting Amazon will have ‘no impact’ on their Christmas trading performance.

It brings up questions: Just how accurate are outlook surveys as a predictor of future events? Does Kiwi pessimism mean bad news ahead? Has Australia weathered the Amazon storm? Or is Amazon poised to cut retailers lunch for good?

Last Christmas, Amazon was a new player in the local retail space – it’s little wonder the Christmas impact was so muted. As we head into Christmas number two it might be unwise to imagine the threat gone.

“Last year was Amazon’s first Australian Christmas trading period, but it barely made a blip on the market,” says that Deloitte report. “With a further 12 months under its belt, we can expect Amazon to have a bigger impact on the Australian consumer this Christmas.”

While the retail giant’s performance last year was underwhelming, Amazon has got the scale and capabilities to make a real impact in the Australian retail scene. Whether it does or not is up to the consumer, not retailer opinion.

“It is important to learn the lessons from other countries where Amazon has been so successful,” says Deloitte.

“Amazon Australia continues to invest heavily in its infrastructure and people but it is not realistic to expect the creation of a multi-billion dollar business overnight.”

“So it’s a word of warning – under-estimate Amazon at your peril.”

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