How will Amazon Australia affect wine retail?
While the long-awaited launch of Amazon into the Australian market in December failed to live up the hype, there are signs that the online juggernaut is now making its presence felt
At a recent Drinks Association Network Breakfast Yngve Andersen from Bain and Company presented to an eager crowd of liquor industry members what to expect from Amazon over the coming 5 years and his prediction of Amazon’s offering growth and the implications for the drinks industry.
The six-month lead up to Amazon’s local Australian launch in December 2017 had the media and retail industry in a frenzy with predictions of life-changing product offerings and service experiences – the likes of which Australia has never seen. But it all imploded in a heap when the reality fell way short of the hype: the product offering was small, new delivery options were non-existent, prices were less than competitive.
Fast forward four months, though, and Amazon is slowly ticking away at what it does best: constant learning, improvement and innovation.
At the Drinks Association Network Breakfast, the Bain presentation showed some revealing statistics to highlight the significant impact Amazon has had in the short time since launch. For example, in January 2018, Amazon was the highest ranked retailer site in Australia outstripping both Woolworths and Coles and, on some key Amazon categories, such as electronics and toys, the prices advertised on Amazon were significantly cheaper than the same product on offer at JB Hi-Fi, Harvey Norman and Toys R Us.
So, what does this all mean for the drinks and, more specifically, the wine industry?
Well, according to Andersen, alcohol is probably not a priority category for Amazon in the short-term, but beverages as an entire category (both alcoholic and non-alcoholic) is Amazon’s largest grocery category world-wide. In fact, it is growing at an impressive 65%. So, the prediction is that once it has cemented its position in its more traditionally strong categories such as electronics, computers and clothing, then grocery and beverages will be next.
With such strong global growth in the beverage category, it makes for an attractive offering for product innovation. For example, brands like Soylent in the US are launching exclusively on Amazon through its Amazon Launchpad program, helping it to become the number one seller in beverages on Amazon.
This innovation is not restricted to purely product offerings, as seen with Diageo UK launching a cocktail-making series on Amazon Echo that shows users how to make cocktails and then gives them the ability to order the ingredients they need for their favourites directly from Amazon.
This gives us as an industry some time, but not much, to get all of our ducks in a row and plan an approach to the Amazon opportunity in Australia. Bain’s Andersen suggested the following prescriptions:
Select the Amazon Model you would like to sell through: Amazon (direct) or Amazon Marketplace both have pros and cons around distribution, price and presence, so you need to decide what is the right approach for your business
Define the right portfolio and assortment to offer: Start focussed and slowly expand to match the needs of your customers
Empower your organisation: A shift in fundamental key account capabilities as well as agility across all functions in an organisation is required to maximise the opportunity
With over 20,000 wines SKUs on offer (currently in Germany) as well as the promise of free and same-day delivery through Amazon Prime, the stage is set for an exciting new chapter for the wine industry in Australia.
Author: Rodney Sammut