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How Amazon works - and why Aussie retailers are at risk of getting crushedND
John McDulin, Australian Financial Review, 12th of April 2017
After years of speculation it appears, again, that Amazon will make it to Australia. Watching Amazon’s rapid ascent to dominance in the UK first hand suggests that without innovation Australian retailers will struggle. The company has recently taken out 250 trademarks covering 30 classes of goods in Australia which has not gone unnoticed with Harvey Norman boss Gerry Harvey describing the US based company as ‘parasites’.
Amazons success comes from its business model which prioritises low prices, loyalty and playing the long game. The CEO Jeff Bezos explicitly does not prioritise profit or profit margins instead championing an ‘intergenerational approach’, prioritising free cash flow over traditional net income. Bezos takes the cash created through Amazons retail operations and reinvests it back into Amazon's infrastructure and logistics to ensure a positive customer experience. Australia’s population has a high level of disposable income and companies which have very healthy margins that Amazon plans to undercut.
For more information see: www.afr.com