The CEO of Unilever, Paul Polman delivered the following at The Harold Wincott Awards for Financial Journalism back in 2012 and while I've lost count of how many times I've posted this on HC over the last 4 years the level of complacency remains a disconcerting habit for Australian businesses still clinging onto outdated models which worked in the past;
The world is changing fast.
The confidence of consumers – given this state of the world and our ability to navigate the challenges – is at an all time low, certainly in developed markets. The events of the last few years have further undermined people’s trust – in governments, international agencies, regulators, the providers of financial services and business generally. The traditional media industry is also facing a decline in trust – and in readership. The latest Edelman Trust Barometer shows less than 50% of the general public trust the media. Higher than governments perhaps, but less than business. For an industry whose whole currency, I would have thought, is trust, this is a worrying phenomenon. This growing sense of disenchantment is leading to a call for more responsible forms of Capitalism. For consumers, the economic crisis and the failure of institutions to respond has triggered even more profound and lasting changes in people’s attitudes and behaviour. First, the crisis has awakened a revival of core values: self-reliance, practicality, hard work, thrift, community, honesty, kindness. People are re-evaluating their priorities and applying these ideals in every aspect of their lives, including their purchasing decisions and consumption habits. This move from what has been called ‘mindless to mindful consumption’ is not niche or fringe, and it has major implications for business. In many ways, consumers are running ahead of the companies who serve them. - If we stick our heads in the sand and assume these trends are transitory and that there will soon be a return to the old order, then we are deluding ourselves. Worse, we are in danger of becoming obsolete. The old models are dead.
When someone from one of the leading innovation giants on the planet starts making bold claims such as, "We are going to destroy the retail environment in Australia" you can be reasonably sure that, Amazon which have created a culture that's not only uniquely different but often at total odds with how most business leaders think, the imminent threat of disruption starts getting very real...
Amazon founder, Jeff Bezos once said, "When [competitors are] in the shower in the morning, they're thinking about how they're going to get ahead of one of their top competitors. Here in the shower, we're thinking about how we are going to invent something on behalf of a customer."
The message is pretty simple, yet Amazon is consistently misunderstood by competitors and market analysts and it is often these misunderstandings which make Amazon a more serious threat. To give an example @pipebuilder kindly posted a recent AFR article on this thread from Roy Morgan Research which made the following observations;
If the margins on food and grocery sales at Australia's largest supermarket are relatively low as suggested by Ms Levine, and Amazon plans to perform pre-launch price audits to undercut local prices by 30%, then how is the risk to Woolworths being overstated?
This is where Ms Levine should revisit that quote above from Jeff Bezos confirming Amazon's consumer obsessive focus as opposed to competitor obsession... of those many [poor] attempts at online sales what incentives or customer benefits were offered to promote this transition. I've ordered online through Coles a couple of times in the past - no problems navigating the platform, negligible savings from limited online discounts, and 24 hour delivery charge didn't get me overly excited... Amazon's significant cost structure advantages which allow it to undercut Woollies and Coles brick and mortar stores by 30%, a no-stock free product replacement guarantee, free 2 hour delivery, and a complimentary bottle of wine might incentivize online penetration. (Think the wine is only part of an introductory offer)
Not so fast there, Ms Levine... The biggest threat to the grocery retailers is the international bricks and mortar players who are planning to destroy the retail environment in Australia and disrupt the entire supply chain. Save for Amazon's secret 'Project-X' and 'Project-Como' bricks and mortarambitions which I'm led to believe involve some kind of drive-in operations and another proving virtual shopping touch screen experience which allows customers to shop the isles without the need for trolleys or having to carry and groceries, Amazon have also been wondering what shopping would look like if you could walk into a store, grab what you want, and just go...?
(20min delay)
