By the end of 2018, as it is confirmed by the management authority of Amazon, Amazon is going to be fully operational in the Australian market. On the one hand the striking absence of an innovative retail culture in the Australian market poses a serious threat to the sustenance of the Australian retail sector. On the other hand, however, some Australian retail companies see no harm in the sudden arrival of Amazon as they believe the company will offer these retail sectors an alternative outlet of selling their products. The present report intends to critically analyze the variety of views and expert opinions regarding the impact of the arrival of Amazon on the Australian retail market and state a personal opinion on the same.
The entry of Amazon is likely to create a huge change in the Australian retail sector, and while some argue in favor of it, considering the improvement it can bring in consumer experience, others complain that the retail companies which are less competitive may perish in the process. This implies a possible downturn in the economy of Australia. First of all, it is important to discuss and critically evaluate the arguments in favor of Amazon entering the Australian market. First of all, it has been argued by some critics that the entry of Amazon will unquestionably improve the consumer experience in Australia. As one of the biggest retailers in the entire world, Amazon is going to improve consumer experience by offering a huge variety of products at cheaper and highly affordable price while also ensuring faster delivery times. While this may not directly benefit the retail sector, it indirectly will. The very reason why Amazon is likely to have a massive impact on the Australian retail market is the lack of innovative, up-to date market culture at these companies. The Australian retailers such as Harvey Norman and JB Hi-Fi will simply fail to thrive because they are not innovative and competitive enough to survive the highly competitive market of any country. The arrival of Amazon can not only improve the consumers of Amazon but can essentially boost the competitiveness of the retail sector of Australia which must innovate or disrupt. Amazon could become a game changer in the Australian retail sector because of its service called Amazon Prime, where customers pay an annual fee of about $100 for free and fast delivery or its Amazon Now service which delivers groceries within an hour. The Australian companies will also need to innovate themselves in order to adapt to the technologically advanced, innovative retail culture. According to Noel Norton, CEO of Australian customer experience agency Kalido, Amazon’s entry should be welcome in Australia as it will help in making the Australian retail companies more innovative and competitive, that will ultimately lead to a dynamic retail environment, benefitting the Australian economy at large. Most of the retail firms in Australia are unable to experience much progress owing to their over-dependence on outdated marketing research tools and the advent of Amazon can change their complacent attitude towards business. In fact, the brilliant use of data analytics by Amazon has guided the company’s decisions for expansion and customer experience optimization over the last years (Pash, 2017). Further, it has been argued that the arrival of Amazon as a physical presence will surely benefit the Australian government. This is because much before Amazon’s literal expansion in Australia, many Australian consumers have been buying goods via online US Amazon portal. Though the offline retail sectors were at a loss, the Australian government has not been able to collect any tax or enjoy even a small part of the profit of the US e-commerce giant. The opening up of the brick and mortal store in Australia would enable the Australian government ask for taxes from the company. The state sales tax to be imposed on the physical stores of Amazon would certainly help in enhancing the revenue of the Australian government and would contribute to the economy as well. Again, as per the words of Jeff Bozz, the CEO of Amazon, the company is not just expanding in Australia, but it also intends to contribute directly to the well-being of the nation. In fact, as per Bozz, the company has already hired 100 employees and is yet to hire larger number of Australians for its cloud computing operations (Pash, 2017). Hence, according to some critics, the entry of Amazon in Australia would result in the creation of thousand jobs and is also likely to empower small businesses to access wider marketplaces.
However, this point has been totally rejected by some others. According to these critics, the imminent threat that Amazon’s entry poses to the sustainability of Australian retail sector is huge and undesirable. Amazon is not only able to compete on price and product variety, but also on speedy and free delivery. This would undoubtedly lead to unfair competition in Australia. With its economies of scale, Amazon will win on price as well. The advent of Amazon is sure to doom the retail sector. According to the findings of a survey conducted by the Commonwealth Bank on 505 Australian retailers, a mere 14% of the retail company owners have a proper business plan to combat the arrival of Amazon (Cooper, 2017). According to the National Manager of Commonwealth Bank of Australia, Jerry Macey, most of the Australian companies will fail to survive in the face of cut-throat competition. Most of these companies innovate minor and negligible aspects of their business, such as product design and most of the retail companies of Australia score a mere 26.2% on the total scale of innovation (Copper, 2017). Surely, these companies will be squeezed by Amazon that would definitely result in the shutting down of existent Australian companies, elimination of employment opportunities and a sharp decline of the governmental revenue of Australia. Undoubtedly, the Australian retail sectors would fail to bring about any drastically innovative change within a year and would be squeezed by Amazon. According to the retailer Harvey, as and when Amazon has expanded itself in other territories, it has inevitably destroyed thousands of jobs, thereby affecting the economy of the nation. However, according to some, given the chance of governmental intervention, there is no harm in allowing Amazon to enter the market. Amazon is no longer confining itself to the business of grocery and as a physical retail store it may just be likely to expand its include furniture and electronic products. Known for its innovative technology, Amazon brick and mortal stores might use technology to allow consumers experience products before purchase that would lead to the growth of the company at the expense of native retail stores. It is very much possible that Amazon might also build electronics stores which will focus on Amazon’s devices such as its smart home speaker, Echo that would allow consumers to test the product before buying. This would result in unfair competition and the Australian retail markets would simply suffer. Despite the online presence of Amazon, the Australian companies could survive, given the prospect of selling furniture or electronic products which consumers would wish to experience before buying. However, the company’s brick and mortal store ambitions will prove to be detrimental to Australian economy, if sustainability is not ensured in the process.
It is clearly evident that the physical retail expansion of Amazon in Australia is surely going to bring in a shocking result within its five years of arrival in the Australian retail market. Especially companies like JB Hi-Fi, Myer and Harvey Norman are going to suffer the most. Chances are high that Amazon being a US company will hire a major part of its workforce in Australia from USA and that would lead to the elimination of job prospects. The key area where the Australian retail companies will fall behind is innovation. While it is certainly understandable that the Australian retail companies should start innovating business, thereby improving consumer experience, innovation takes time. Although the Australian retail sectors might just adopt innovative business strategies pertaining to the organizational structure or product design, these companies are still going to lag behind Amazon. A look at the physical store of Amazon, Amazon Go can explain this— it is a physical store where consumers can pick things off the self and sensors know what they have put into their bags and they can just walk out (Lang, 2015). This form of innovation will easily outrival an Australian company. Although some have argued in favor of Amazon’s expansion in Australia considering the possibility of revolutionizing the idle retail sector of Australia, others have claimed that Amazon would not be a powerful physical store at all. However, there is a chance that Amazon physical stores will disrupt the companies much before they can innovate. Hence, a sustainable approach to the problem is required.
The “invisible hand” argument was being put forward by the eminent economist Adams Smith, according to whom, the market forces should determine the demand and supply of goods and services in a market and governmental intervention should be completely eliminated. However, this view cannot be justified in case of the Australian retail market. The Australian retail market is going to lose its position if the government does not come forward and extend its help via sustainable business policies (Brook, 2013). Although some have argued about the benefit of Amazon’s entry in the Australian retail sector considering its ability to boost the innovation culture in the Australian retail sector, there can be gain stating that it might result in unfair competition in the retail sector. The principal idea governing the idea of “invisible hand” is the shared benefits of the common good. However, if Amazon is allowed to dominate the market, the other retail companies may lose ability to thrive. The government can combat the problem of market inequities by initiating strict regulations and taxes and subsidies. Those who argue that the Australian government should ensure the entry of Amazon in the retail market in Australia simply because the decision would improve consumer experience and may not largely affect retail giants like Woolworths and Coles are wrong. The entry of Amazon should be welcome given there is strong governmental intervention as well. It should be noted that in an optimally efficient market, the resources are perfectly allocated to those that need them and exactly in the amounts they need. In inefficient markets, however, that is not the situation; some may have too much of a resource while others do not have it at all. In case of Australian retail sector, if invisible hand is allowed to operate, social welfare cannot be ensured (Alchon, 2014). With the help of its highly advanced technology, and disruptive innovation, Amazon will successfully establish its monopoly in the retail sector. However, if the counter-argument justifying the arrival of Amazon is to be considered, the invisible hand argument can be justified. As per this argument, all the companies should operate without any trade restriction, and as the Australian companies would face intense competition from Amazon, they will automatically adapt themselves to technological innovation for future sustenance. However, it will not at all ensure social welfare in the process (Alchon, 2014). In case Amazon is allowed to work in its best self-interest, the economy of Australia will doom. Although the consumers would be able to enjoy improved buying experience and would be offered products at highly affordable rates, the overall social equity cannot be ensured. In this case, as Amazon will enjoy economies of scale, it will charge less and consequently the Australian retail sectors will start losing its loyal consumers. The Australian economy will be affected further as more jobs will also be cut off. As a result, the absence of government intervention will not beneficial. Rather, the government should introduce strict trade entry barriers whereby Amazon has to pay huge amounts of taxes for staying in Australia. Further, here should be trade regulations whereby the government must dictate the company to maintain a healthy proportion of native and foreign workers in its workforce. As huge amount of state sales tax will be imposed, the company’s ability to reduce the price will also be limited. By raising entry cost and limiting the development of infrastructure of Amazon in Australia, control can be ensured.
As far as my personal opinion is concerned, I believe that Amazon does have the potential to disrupt the retail landscape of Australian market. The products will not only be available to the consumers at highly affordable rates, but would also result in improved customer experience. As Morgan Stanley himself has called Amazon a “digital monster” and “country killer’’ it becomes clearly evident that the company has done much harm to the profit margins of established retailers in the new markets it enters. However, I see no reason why Amazon should be denied entry in the Australian retail sector. Amazon might not essentially destroy the physical stores, but can rather push them to become more innovative and adapt to technological changes. While most of the retail sectors in Australia have been significantly complacent to business innovation, the arrival of Amazon can only change the complacence. However, the company should not be allowed to work in a free market, as it does have a potentiality to gain monopolistic dominance over other small retail firms such as grocery, book stores and boutiques. The Australian government should not only ensure heavy taxes, and raised entry cost, but also sustainable business policies should be introduced (Butterly, 2017). Earlier, I think Amazon had already been accused of mistreating and exploiting its warehouse workers in Scotland, and hence the government must ensure that sustainable employee-friendly policies are also introduced in case of global trade. It is important to update the regulatory framework of Australia if Amazon has to be allowed to conduct trade in Australia. The invisible hand theory states that importance of ensuring social justice for all. Considering this theory, it should be noted that Amazon’s entry will bring in social benefit. The government will be able to enjoy growth in its revenue for the first time from Amazon, as the company will launch it physical store and will operate in the country itself. It will also create employment opportunities for the Australian residents while also ensuring growth of business innovation in Australia (Massa et al., 2015). The arrival of Amazon will help in revolutionizing the retail sector, and there is indeed no point in stopping the same, as Australians have already been availing Amazon service via its US portal. However, as mentioned above, it is important to ensure governmental international rather than allowing the company to operate in a free market. The state and federal government laws as well as the competition policies need to be updated (Amirkhanyan et al., 2017).
Conclusion:
The arrival of Amazon can prove to be highly beneficial. Even if Amazon gains upper hand in the retail sector, yet it will be hiring Australian employees, serving the Australian consumers in a better way and will pay higher taxes to the Australian government for enjoying increased profit margin. So in the end, the country and its people will benefit. However, it is important to ensure that there are strict trade regulations so that the unprepared Australian companies do not completely lose out in the market and can sustain themselves before getting innovative.
Reference List:
Brook, B. (2017). Shopping centres are “in fear” of Amazon’s arrival. NewsComAu. Retrieved 16 August 2017, from https://www.news.com.au/finance/business/retail/amazons-impending-arrival-means-australian-shopping-centres-have-to-shape-up-or-risk-shutting-down/news-story/66ecd48160d3e9c47c8e684409241513
Butterly, N. (2017). Giant Amazon ‘a gorilla that needs taming’. The West Australian. Retrieved 16 August 2017, from https://thewest.com.au/business/retail/nick-xenaphon-proposes-changes-to-competition-laws-to-keep-amazon-from-wiping-out-local-retailers-ng-b88513389z
Lang, J. (2015). Amazon comes of age.
Pash, C. (2017). It’s official: Amazon is coming to Australia. The Sydney Morning Herald. Retrieved 16 August 2017, from https://www.smh.com.au/business/retail/amazon-is-coming-to-australia-with-low-prices-vast-selection-and-fast-delivery-20170419-gvo6lb.html
Cooper, L. (2017). Most Australian Retailers Are Not Ready For Amazon Launch. Huffington Post Australia. Retrieved 16 August 2017, from https://www.huffingtonpost.com.au/2017/03/24/most-australian-retailers-are-not-ready-for-amazon-launch_a_22009874/
Alchon, G. (2014). The invisible hand of planning: Capitalism, social science, and the state in the 1920s. Princeton University Press.
Massa, M., Zhang, B., & Zhang, H. (2015). The invisible hand of short selling: does short selling discipline earnings management?. The Review of Financial Studies, 28(6), 1701-1736.
Amirkhanyan, A. A., Meier, K. J., & O’Toole, L. J. (2017). Managing in the regulatory thicket: Regulation legitimacy and expertise. Public Administration Review, 77(3), 381-394.
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