Amazon's entry into Australia is expected to have a significant impact on the retail landscape. While prices may not be drastically lower, Amazon will leverage its massive product selection and delivery options to gain an advantage over Australian retailers. Based on its experience in Canada, Amazon is likely to establish multiple warehouses across Australia by 2020 and bring its latest logistics innovations such as robotics and drone delivery. Australian retailers will need to improve their omnichannel capabilities and supply chain maturity to better compete with Amazon's highly personalized and predictive model.

1. Amazon – Impact on Australia
2017

2. Who we are.
GRA was founded in 1997 and is Australia’s premier specialist supply
chain consulting firm. Our team has extensive commercial &
government supply chain and logistics experience across a broad
range of industries and at all levels of the process, both strategic and
operational.
At GRA we understand the complex challenges retail organisations are facing. We can help you
with not only designing an optimal retail supply chain, but also ensuring that your inventory is
optimised to ensure that the highest possible service levels can be achieved at the lowest
possible cost.
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Thought Leadership Authors
Partner - Sydney
James Allt-Graham
Partner – Melbourne
Carter McNabb
Senior Manager – Sydney
Shanaka Jayasinghe
Senior Consultant – Melbourne
Phillip Diao
Consultant – Sydney
Len Lertsumitkul

3. Dominant eCommerce retailers by country / region
What Amazon’s imminent entry will mean for Australia?
Amazon is currently present in 14 countries and tends to be most successful in ‘Western’ markets similar to
the US such as the UK and Germany – will Australia be next?.
Most eCommerce retailers still tend to be somewhat restricted to their country / region of dominance. Their
desire for global expansion will increasingly push these companies into local opposition.

4. Why is Amazon entering Australia?
Most other markets that Amazon currently operate in are several times larger than Australia, with Canada
probably being the most comparable market in terms of overall size and geographic vastness.
Having experienced relative success there as well as in other developed markets of Western Europe, could
Amazon be viewing Australia as another possible ‘quick-win’ where it can leverage its brand awareness and
core strengths to overcome the awaiting challenges?
High internet & smartphone
penetration levels
Undeveloped and fragmented
local eCommerce scene
Population concentrated
in main urban areas
Increasing trend of online
shopping in Australia

5. eCommerce outlook in
Australia – comparisons
with the Canada and the US
Despite the lack of a local warehouse
presence, Amazon is already the
leading internet retailing platform in
Australia with an estimated 9% market
share (~AU$2 billion in sales)
Source: Euromonitor, Desktop Research, GRA Analysis
Market Share by Online Retailer
CA$ 23.9 billion
(6.5% of all retail)
US$ 312.1 billion
(10.4% of all retail)
AU$ 20.5 billion
(7.2% of all retail)
8%
9%
9%
74%
65%
68%
0% 20% 40% 60% 80% 100%
2012
2014
2016
eBay Woolworths Apple Wesfarmers Other Retailers
Online Retail Market Size - Australia

6. The Australia eCommerce market is
projected to grow
at 12.2% CAGR (Compound Annual
Growth Rate) over the next 4 years.
Even though all current orders are
fulfilled from overseas, Amazon has
a strong brand awareness in
Australia and is already the largest
eCommerce retail platform
by sales revenue.
Since its entry into Canada in 2010,
Amazon has actually seen its
market share reduce over the years
as the eCommerce market
became more fragmented.
Nonetheless, Amazon will be
hoping to apply what they’ve
learnt from their Canadian
experience to their Australian
market entry.
Amazon Marketplace has been
very successful and is a significant
contributor to its revenues. eBay has
been struggling with reduced
market share in many other
markets, and is likely to lose further
share in Australia once Amazon is
firmly established here.
Despite market share seemingly fragmenting for key online retailers as newer entrants emerge, the size of the
market is certainly increasing. Thereby, in absolute terms, online is a considerable growth opportunity for retailers.

7. What we know about the Amazon
way of doing business:
In addition to its customer-centric view and long-term
focus, Amazon is armed with its artillery of innovation,
market capitalisation and scaling capacity
If you're competitor-
focused, you have to wait
until there is a competitor
doing something. Being
customer-focused allows
you to be more
pioneering.
Your margin
is my
opportunity.
I would never say no
to something the team
wanted to do, but I might
say yes to something the
team didn't want to do. You
want there to be multiple
ways to get to 'yes' because
you want to encourage risk-
taking.
We've had three big ideas
at Amazon that we've
stuck with for 18 years, and
they're the reason we're
successful: Put the
customer first. Invent. And
be patient.There are two kinds
of companies, those that
work to try to charge
more and those that work
to charge less. We will be
the second.
Frugality drives
innovation, just like
other constraints do.
One of the only ways
to get out of a tight
box is to invent your
way out.
Focusing on the
customer makes a
company more
resilient.
Jeff Bezos - CEO

8. Amazon -
Understanding
Consumers like no
other retailer:
Key to Amazon’s successes is its
profound understanding of what
consumers want, which allows it to
correctly address their most
pressing needs
‘CUSTOMER FIRST’
FOCUS
CONVENIENCE
PERSONALISATION
“IF YOU MAKE CUSTOMERS UNHAPPY IN THE PHYSICAL
WORLD, THEY MIGHT EACH TELL SIX FRIENDS. IF YOU MAKE
CUSTOMERS UNHAPPY ON THE INTERNET, THEY CAN EACH
TELL 6,000.”
“WE’RE NOT COMPETITOR OBSESSED, WE’RE CUSTOMER
OBSESSED. WE START WITH WHAT THE CUSTOMER NEEDS AND
WE WORK BACKWARDS.”
“WE SEE OUR CUSTOMERS AS
INVITED GUESTS TO A PARTY, AND
WE ARE THE HOSTS. IT’S OUR JOB
EVERY DAY TO MAKE EVERY
IMPORTANT ASPECT OF THE
CUSTOMER EXPERIENCE A LITTLE BIT
BETTER. ”
AMAZON WAS AN EARLY ADOPTER OF USING BIG AND
SMALL DATA FOR PERSONALISATION, USING A CUSTOMER’S
REAL-TIME BROWSING AND OVERALL BUYING HISTORY TO
RECOMMEND PRODUCTS THAT THEY MAY BE INTERESTED IN.

9. BARGAIN HUNTERS
• Value-driven
• Cost-conscious
• Value seekers
• Opportunists
FAST MOVERS
• Utility-driven
• Time-poor
• High-value items
• Immediate need
COST SAVERS
• Cost-driven
• Time-rich
THRILL SEEKERS
• Experience-driven
• Personal interest
• Need for support
Through its use of data analytics, Amazon
has an exceptional understanding of each
customer's individual viewpoint and
preferences.
Its success can be attributed to having an
overall service-offering profile (product
quality, price, delivery speed) that is able
to satisfy the different categories of
customers in all four quadrants above:
“Cost Savers” are primarily cost-driven and
look for the cheapest options;
"Bargain Hunters" are value-driven and look
for a good deal;
"Thrill Seekers" desire the memorable
purchase/product experience;
"Fast Movers" value efficiency and utility.

10. Roll-out plan in Australia
and Impact Assessment:
Amazon’s entry is likely to be a multi-
stage roll-out with a Full Retail Offering
to eventually being available in
Australia by the end of 2019, which
means certain retailers will be
affected sooner than others.
Nonetheless, consumers are unlikely to
see drastically lower prices with
Amazon’s arrival
Amazon’s anticipated roll-out plan in Australia

11. “Amazon’s arrival will put downward pressure on prices, but its true competitive
advantage over Australian retailers is in product proliferation and delivery options”
Despite the weakening Australian
dollar, Australian retail prices have
reduced considerably across most
categories in recent years. The price
differential between the US and
Australia has more than halved across
most product categories in the last
five years.
Amazon’s products will likely be sold
at a premium to US prices. As a result,
Amazon should find more of a
competitive advantage in product
range and delivery, rather than price.

12. Amazon’s Product Proliferation – Impact Assessment:
In comparison to Australian retailers, Amazon operates on a completely different scale, typically carrying millions of products.
With cost pressures on Australian retailers likely to be modest, product proliferation will be a major differentiator for Amazon.
Top 10 Categories of products on sale* – Amazon US Jun 2017 Estimated product count by market* Amazon
Product Count* – US May 2017
Source: ExportX Analysis
Source: ScrapeHero AnalysisSource: ScrapeHero Analysis
Note: Product count figures
include items from third-party
sellers on Amazon Marketplace”.

13. Amazon’s Product Proliferation,
introducing a new meaning to
‘choice’.
With the pricing differential between the US and
Australia having been reduced significantly over the
past few years, product proliferation will likely be a
greater competitive edge for Amazon, more
significant than price, as local consumers look set to
benefit from a wide range of choice previously
unknown to Australia.
A significant
proportion of
products listed on
Amazon (>90%) are
from third-party sellers
using Amazon
Marketplace, which
will also be available
in Australia
In other mature
markets,
Amazon’s product
count has been
growing on average
55% year on year from
2013-2015
As of 2017, there
are over 350
million products
for sale on the US
Amazon website
(~15 million
products carried
directly),
compared to 26
million available
at Walmart
Amazon operates on a totally
different scale, typically carrying
millions of SKU’s as opposed to
the tens of thousands of SKU’s
carried by Australian retailers

14. Case Study:
Amazon’s Entry into
Canada – Impact on
Retailers:
Amazon’s entry had
widespread impact on
Canadian retailers but many
were able to adjust and co-
exist with Amazon. Those
retailers who were ill-equipped
and reacted too late were
ultimately the real victims
“It is not the strongest of
the species that survive,
nor the most intelligent,
but the one most
responsive to change.”
Charles Darwin
Australian retailers must learn to adapt quickly and be prepared to
further improve on areas that already they excel in.
Learnt from Walmart’s
entry in the 90s to quickly
react to Amazon’s arrival
Relaunched e-commerce
site in 2011
Invested heavily in digital
initiatives
Early pioneer of Click &
Collect in Canada
Iconic Canadian retailer
500 stores nationwide
Canada’s largest
grocery chain
2,000+ supermarkets
More time to react, due to
Amazon’s lack of grocery
offerings early in its launch
Started selling online and
introduced Click & Collect
in 2014
Shifted a stronger focus
towards ‘Fresh Foods’
Increased buying power
through M&A
consolidation
Canadian venture of the
US retail chain that began
in 1952 but currently in the
process of liquidation
Canada’s largest electronics
retailer, acquired by US-chain
Best Buy in 2011 and eventually
shutting down in 2015
Early pioneer of e-commerce in
Canada (late 90s), but never
truly ramped up that capability
Struggled to distinguish itself
as a specialty retailer for its
‘core’ products
Turnaround plans were
further hampered by high
management turnover
Modest (but very costly)
improvements were
attempted, as many of their
shoppers were thought to
be averse to change
Offered same products as
other online non-specialist
retailers
Poor brand strategy –
operated under 2 different
brands despite duplicate
location
Didn’t adapt to changing
consumer behaviors
(‘showrooming’ and buying
elsewhere)
Waited too long to invest
in online channel

15. Amazon’s Entry into
Canada – Logistics
Innovations:
Amazon invested heavily as it
built its presence in Canada to
bring the latest innovations in
logistics to give it a competitive
edge in the market
Since entering Canada in 2010,
Amazon has opened a new warehouse
location every year.
There are currently 5 fulfilment centres
in Canada, serving both the East and
West coasts of the country.
With Amazon recently patenting its ‘Sky
Warehouse’ concept, could this really the future
of warehousing and fulfillment?
Amazon brought its ‘robotics
warehouse’ to Canada in 2015,
using the latest technology to
help them ‘fulfil customer
orders much faster’ as well as
saving floor space, enabling
them to have ‘50% more
inventory selection in the
building’.

16. FREIGHT/
DELIVERY
Amazon’s Entry into Canada
Amazon initially relied on 3PL providers (CP, UPS,
FedEx etc.) to deliver their orders. However, Amazon
has been investing in building its own logistics arm and
since launching in 2016, an increasing number of
orders are being delivered by Amazon Logistics.
Amazon Prime (CA$79 per year) service offerings:
• Same day delivery available for Toronto and
Vancouver (order before noon)
• Next day delivery for Toronto, Vancouver,
Montreal, Calgary and Edmonton
• Free delivery threshold set at $35 per eligible order
• No free deliveries to ‘remote’ areas
Amazon have also started trialing its drone delivery
service (Prime Air) in Canada from late 2016.

17. We believe Amazon plan to
eventually set up 3-5
warehouses in Australia by
2020 (including 1 potentially in
Western Australia as volumes
become feasible there).
Similarly to Canada, Amazon is
also likely to bring its latest
warehousing technology
(including its robotics
expertise) to Australian
fulfilment centres.
98% of the population live in the areas
painted light blue on the map
Amazon Warehouses are likely to be located in outer metro areas of cities with strong
transport links.
Amazon has signed a lease for its first Australian warehouse, located in Melbourne’s south-
eastern suburb of Dandenong and are also finalising the lease terms for its Sydney
warehouse to be located at Eastern Creek in the city’s west.
What logistical
innovations can
Amazon possibly bring
to Australia?
Based on Amazon’s experience in
Canada, we are likely to see
similar developments in Australia
as Amazon slowly establishes itself
and eventually ramps up
investments to build up its logistics
capabilities here – could Robotic
warehouses and drone deliveries
be potentially just around the
corner for Australia?

18. HOW WILL THESE
CONVERGE?
WHAT WILL THEY
CREATE?
Big Data
Personal
Computers
Demand
Sensing
3D Printing
Predictive
Analytics
Smartphones
P2P Couriers
The Internet
Online Retail
Car drops
Physical Stores
Click & Collect
Drone Delivery
Freight & Delivery
Initially Amazon will most likely rely on local 3PL
providers to deliver their orders:
This will provide ample opportunities for multiple local
3PL businesses to partner with Amazon and up their
game to service such an important client with huge
volumes. Amazon have begun negotiations with
Australia Post and Couriers Please, with talks supposedly
at an ‘advanced stage’.
Amazon will also start to invest on their distribution
network as their operations grow and when they get a
better feel of the logistical challenges in Australia. There
is potential for a lot of technology and Supply Chain
innovations to be introduced, which will revolutionise
the Logistics sector within the country.

19. Are you ready for Amazon?
Online to Omni-Channel Supply Chain Maturity Model
Amazon’s relentless focus on customer experience and innovation has resulted in their highly personalised and predictive
supply chain model (Stage 4). In order to survive and co-exist with Amazon, Australian retailers will need to lift their maturity
level in all supply chain areas (strategy, operations planning & execution)
CAPABILITY VISIBLE & RESPONSIVE FLEXIBLE PERSONAL & PREDICTIVE

20. Customer
Value
Proposition
Supply
Chain
Strategy
Sales &
Operations
Planning
Collaborative
Forecast and
Replenishment
Planning
Demand and
Supply Planning
& Inventory
Optimisation
Last Mile /
Logistics
Network/
Warehousing
StrategyOperationsPlanning
Execution
• Online channel with products
available for purchase
• Customers can complete purchases
online
• Basic delivery options
• Defined supply chain strategy
• Assess current SC capabilities and
gaps to providing next level CVPs
• No or basic level S&OP
• No or minimal supplier collaboration,
only transactional interactions with
suppliers
• Min/max methodologies
• Minimal data inputs
• Products delivered through basic
postal networks, one or two shipping
providers
• Minimal or Basic tracking capabilities
• Wide delivery windows (1 day)
• Single warehouse or fulfilled from store
• Online and offline network not
integrated (can be co-located)

21. Customer
Value
Proposition
Supply
Chain
Strategy
Sales &
Operations
Planning
Collaborative
Forecast and
Replenishment
Planning
Demand and
Supply Planning
& Inventory
Optimisation
Last Mile /
Logistics
Network /
Warehousing
StrategyOperationsPlanning
Execution
• Stock availability across channels shown
to customer
• Purchase decision information (e.g.
product specs, reviews etc.)
• Multiple delivery and collection options
(e.g. same-day courier, click and
collect etc.)
• Reactive supply chain strategy
• Progress capability to match market
leaders
• Operational S&OP
• Provide vendor forecast and conduct
cyclic meetings with key suppliers on
demand and replenishment planning
• Supplier portals for basic data such as
forecast & delivery plans
• TPRP methodologies
• Basic available to promise
• Online & offline planned or
managed separately
• Detailed tracking of delivery
• Narrow delivery windows (1-2hrs)
• Partner with delivery service aggregators
(e.g. Shippit, Temando)
• ‘Click and collect’ options from stores or
pickup points (e.g. Woolworths & eBay,
Woolworths & Sydney Trains)
• Dedicated fulfillment processes for
direct to customer channels
• Responsive network and warehouse
design (size, locations, 3PLs). Located
near customers with single pick
capabilities

22. Customer
Value
Proposition
Supply
Chain
Strategy
Sales &
Operations
Planning
Collaborative
Forecast and
Replenishment
Planning
Demand and
Supply Planning
& Inventory
Optimisation
Last Mile /
Logistics
Network /
Warehousing
StrategyOperationsPlanning
Execution
• Easy and streamlined returns process
(e.g. reusable packaging, generate
shipping labels)
• Multiple channels and methods of
interaction (e.g. website, email, phone
instore)
• Consistent customer experience across
channels
• Innovative supply chain strategy
• Develop new supply chain capability
requirements
• Survey technological developments for
suitability
• Enterprise S&OP
• Cyclic supplier collaboration meetings
with key suppliers to address inefficiencies
and to develop improvements with
actions and measurable outcomes
• Dynamic ATP/CTP based on latest
demand signals
• Integrated online and offline
planning and inventory optimisation
• Redirection of deliveries pre delivery or
after failed deliveries
• On demand delivery options (e.g.
Zoom2u, UberRUSH)
• Efficient forward and reverse logistics,
channel agnostic returns (e.g. ASOS, Best
Buy)
• Dynamic network, capable of fulfilling
from any location to any customer
• Short order to pick to dispatch times
enabling on-demand delivery options

23. Customer
Value
Proposition
Supply
Chain
Strategy
Sales &
Operations
Planning
Collaborative
Forecast and
Replenishment
Planning
Demand and
Supply Planning
& Inventory
Optimisation
Last Mile /
Logistics
Network /
Warehousing
StrategyOperationsPlanning
Execution
• Tailored experience based on customer
preference/profile (e.g. pack size, brand,
related products, shipping etc.)
• High level of customisation and
specification
• Life integrations (e.g. Amazon Dash, smart
packaging, IOT etc.)
• Supply chain strategies that incorporates
blue-sky thinking
• Develop and/or enable new capabilities
and technologies
• Adaptive S&OP
• Deep supplier collaboration & integration
with sophisticated sharing of data
• Demand signals fed back in real time to
suppliers (e.g. Walmart & P&G)
• Customer level demand forecasting
• Predictive Analytics
• Rapid planning cycles, approaching ideal
JIT flows
• Precise delivery timing
• User driven delivery options (e.g. deliver to
car, deliver to current location etc.)
• Control and quality assurance on last mile
interactions (e.g. Amazon Flex)
• Value add last mile customer interactions
(e.g. Enjoy)
• Fully automated warehouse and delivery
systems (e.g. autonomous vehicles)
• Fully integrated warehouses, stores and
channel networks. Customers can place
orders in store for immediate delivery.

24. Stage 1 Stage 2 Stage 3 Stage 4
Capable Visible & Responsive Flexible Personal & Predictive
Strategy
Customer Value Proposition
• Online channel with products available
for purchase
• Customers can complete purchases
online
• Basic delivery options
• Stock availability across channels shown
to customer
• Purchase decision information (e.g.
product specs, reviews etc.)
• Multiple delivery and collection options
(e.g. same-day courier, click and collect
etc.)
• Easy and streamlined returns process
(e.g. reusable packaging, generate
shipping labels)
• Multiple channels and methods of
interaction (e.g. website, email, phone
instore)
• Consistent customer experience across
channels
• Tailored experience based on customer
preference/profile (e.g. pack size,
brand, related products, shipping etc.)
• High level of customisation and
specification
• Life integrations (e.g. Amazon Dash,
smart packaging, IOT etc.)
Supply Chain Strategy
• Defined supply chain strategy
• Assess current SC capabilities and gaps
to providing next level CVPs
• Reactive supply chain strategy
• Progress capability to match market
leaders
• Innovative supply chain strategy
• Develop new supply chain capability
requirements
• Survey technological developments for
suitability
• Supply chain strategies that incorporates
blue-sky thinking
• Develop and/or enable new capabilities
and technologies
OperationsPlanning
Sales & Operations Planning • No or basic level S&OP • Operational S&OP • Enterprise S&OP • Adaptive S&OP
Collaborative Forecast and
Replenishment Planning
• No or minimal supplier collaboration,
only transactional interactions with
suppliers
• Provide vendor forecast and conduct
cyclic meetings with key suppliers on
demand and replenishment planning
• Supplier portals for basic data such as
forecast & delivery plans
• Cyclic supplier collaboration meetings
with key suppliers to address
inefficiencies and to develop
improvements with actions and
measurable outcomes
• Deep supplier collaboration &
integration with sophisticated sharing of
data
• Demand signals fed back in real time to
suppliers (e.g. Walmart & P&G)
Demand and Supply Planning
& Inventory Optimisation
• Min/max methodologies
• Minimal data inputs
• TPRP methodologies
• Basic available to promise
• Online & offline planned or managed
separately
• Dynamic ATP/CTP based on latest
demand signals
• Integrated online and offline planning
and inventory optimisation
• Customer level demand forecasting
• Predictive Analytics
• Rapid planning cycles, approaching
ideal JIT flows
Execution
Last Mile/Logistics
• Products delivered through basic postal
networks, one or two shipping providers
• Minimal or Basic tracking capabilities
• Wide delivery windows (1 day)
• Detailed tracking of delivery
• Narrow delivery windows (1-2hrs)
• Partner with delivery service aggregators
(e.g. Shippit, Temando)
• ‘Click and collect’ options from stores or
pickup points (e.g. Woolworths & eBay,
Woolworths & Sydney Trains)
• Redirection of deliveries pre delivery or
after failed deliveries
• On demand delivery options (e.g.
Zoom2u, UberRUSH)
• Efficient forward and reverse logistics,
channel agnostic returns (e.g. ASOS,
Best Buy)
• Precise delivery timing
• User driven delivery options (e.g. deliver
to car, deliver to current location etc.)
• Control and quality assurance on last
mile interactions (e.g. Amazon Flex)
• Value add last mile customer
interactions (e.g. Enjoy)
Network/Warehousing
• Single warehouse or fulfilled from store
• Online and offline network not
integrated (can be co-located)
• Dedicated fulfillment processes for direct
to customer channels
• Responsive network and warehouse
design (size, locations, 3PLs). Located
near customers with single pick
capabilities
• Dynamic network, capable of fulfilling
from any location to any customer
• Short order to pick to dispatch times
enabling on-demand delivery options
• Fully automated warehouse and delivery
systems (e.g. autonomous vehicles)
• Fully integrated warehouses, stores and
channel networks. Customers can place
orders in store for immediate delivery.
Are you ready for Amazon?