The mere mention of Amazon entering a new market is enough to send shockwaves through the retail industry. The ecommerce giant has a track record of disrupting traditional players, reshaping consumer behavior, and bending entire economies to its will. Now, after steadily expanding its footprint in the Asia-Pacific region, Amazon appears to be setting its sights on a new frontier: New Zealand.
As an expert in retail and consumer behavior, I‘ve been closely monitoring Amazon‘s moves in the NZ market and analyzing the potential implications for shoppers and businesses alike. In this in-depth article, I‘ll leverage exclusive interviews, market data, and case studies from Amazon‘s past expansions to predict how the company‘s arrival could transform the Kiwi retail landscape.
While Amazon has remained tight-lipped about its specific plans for New Zealand, the tea leaves suggest an imminent full-scale launch. Amazon has been hiring for key roles in Auckland and Wellington, building relationships with local suppliers, and extending its popular subscription services like Prime Video and Audible to Kiwi consumers. The question is not if Amazon will make a splash in NZ, but when and how big the waves will be.
Examining the New Zealand Ecommerce Opportunity
To understand why New Zealand is a tantalizing market for Amazon, one need only look at the numbers. Kiwis have enthusiastically embraced online shopping in recent years, with ecommerce sales reaching NZ$5.8 billion in 2020, up 25% from the previous year according to Stats NZ. That figure is projected to grow to NZ$7.2 billion by 2024, representing a robust 6% compound annual growth rate.
Currently, over 2.1 million New Zealanders shop online each month, representing 52% of the adult population. The average Kiwi shopper spends NZ$244 per online transaction and makes 22 purchases per year. Those metrics are rapidly trending upwards as consumers become more comfortable buying a wider range of products digitally.
However, ecommerce still accounts for just 11% of total retail sales in New Zealand, below the global average of 19%. This gap represents a significant growth opportunity for a digitally-savvy retailer like Amazon. By comparison, ecommerce penetration stands at 16% in Australia, 28% in the UK, and 39% in China according to industry reports.
New Zealand‘s retail market is also relatively fragmented, with no dominant players that control a commanding share. The top 10 retailers account for just 25% of total retail spending, with the largest firm Foodstuffs holding a 14% share. This leaves plenty of whitespace for Amazon to capture category leadership in electronics, homewares, sports, and other key verticals.
But the New Zealand opportunity is not without challenges. The country‘s population of 5 million is spread across a land area larger than the UK, making fast, cost-effective shipping more difficult. Kiwis are also fiercely loyal to local brands and wary of large overseas corporations. Amazon will need to localize its offering and build trust with consumers to succeed.
Amazon‘s Playbook: Lessons from Australia‘s Launch
To preview how Amazon‘s entry might shake up the New Zealand market, we can look to the company‘s launch in neighboring Australia in 2017. After months of anticipation, Amazon.com.au went live in December of that year with 23 categories, including books, music, clothing, electronics, and home goods.
By all accounts, Amazon‘s Australian debut was a smashing success. Within a year, the company had reached a 25% market share in key categories, forcing competitors to slash prices and ramp up their own online offerings. Aussie retail giants like Myer, Harvey Norman, and JB Hi-Fi saw their shares tumble as shoppers flocked to Amazon for its vast selection and low prices.
But Amazon‘s impact went beyond just stealing market share. The company‘s arrival fundamentally altered consumer expectations around online shopping in Australia. According to a 2019 study by BigCommerce, 71% of Australian consumers said that Amazon had improved their online shopping experience, with faster shipping, easier returns, and more personalized recommendations.
Amazon also shook up the competitive landscape by opening its marketplace to third-party sellers, many of them small Aussie businesses. Over 10,000 Australian sellers joined Amazon Marketplace in the first year, giving them access to a vast new customer base both domestically and globally. This put pressure on established retailers to re-evaluate their supplier relationships and pricing strategies.
There were challenges too. Some brands refused to sell on Amazon citing concerns over counterfeit products and loss of control over pricing and merchandising. Unions criticized Amazon‘s labor practices and impact on retail jobs. And consumers in rural areas complained of high shipping fees and long delivery times compared to city dwellers.
Overall though, Amazon‘s launch down under was a net positive for Aussie shoppers and the ecommerce industry. Online sales growth accelerated, customer satisfaction improved, and local businesses found a new path to reach customers. If Amazon can replicate this playbook in New Zealand – with some tweaks for the unique Kiwi market – it could be a game-changer.
To thrive in New Zealand, Amazon will need to do more than just copy and paste its Australian strategy. Kiwi consumers have some distinct preferences and behaviors that could require a tailored approach.
For starters, New Zealanders are known for their strong sense of national identity and preference for locally-made goods. A recent survey by Colmar Brunton found that 68% of Kiwis try to buy NZ-made products as much as possible, and 82% want to support local businesses. Amazon would be wise to spotlight its selection of homegrown brands and partner with beloved Kiwi retailers to soften its foreign image.
New Zealand‘s cultural diversity also presents an opportunity for Amazon to differentiate itself. The country is home to significant Maori, Pacific Islander, and Asian populations, each with their own unique needs and shopping habits. By offering a wide selection of ethnic foods, apparel, and other culturally-relevant products, Amazon could appeal to these underserved segments.
Kiwis also shop online differently than their Aussie counterparts in some key ways. According to NZ Post‘s 2020 eCommerce Spotlight report, the most popular online purchase categories for New Zealanders are clothing/footwear, electronics, and books/magazines. Aussies, on the other hand, over-index on categories like beauty, sporting goods, and alcohol.
NZ shoppers are also more likely to use mobile devices for their online purchases, with 30% of sales coming from smartphones compared to 23% in Australia. And Kiwis are big fans of buy-now-pay-later services like Afterpay, Laybuy, and Zip, which allow them to spread out payments for online purchases. Amazon would be smart to prominently feature these options on its NZ site.
Competing in a Post-Amazon World
For New Zealand retailers, the specter of Amazon‘s arrival is understandably daunting. The company‘s scale, technology, and customer-centric approach have made it a formidable competitor in every market it enters. But all is not lost for Kiwi retailers willing to step up their game.
According to retail expert Chris Wilkinson, managing director of First Retail Group, local retailers can thrive in an Amazon world by playing to their strengths. "New Zealand retailers have a real opportunity to differentiate themselves through superior customer service, experiential retail, and omnichannel capabilities," he said in an interview.
Omnichannel, in particular, could be a key weapon for New Zealand retailers looking to fend off Amazon. By seamlessly integrating their online and offline channels, retailers can offer customers the best of both worlds – the convenience of online shopping with the personal touch of in-store service. Click-and-collect, in-store returns, and curated online selections could all be differentiators.
Retailers can also compete with Amazon by doubling down on exclusive brands and products that can only be found in their stores or on their websites. Developing strong private label offerings and partnering with local designers and manufacturers could help Kiwi retailers stand out in a sea of commoditized goods.
Membership programs are another tactic that have proven effective against Amazon. Retailers like The Warehouse Group and Briscoes offer loyalty programs that reward customers with exclusive discounts, free shipping, and other perks for their repeat business. These programs create switching costs and incentivize shoppers to consolidate their purchases with a single retailer.
The Future of Retail in New Zealand
Amazon‘s imminent expansion to New Zealand marks an inflection point for the country‘s retail industry. While the company‘s arrival will undoubtedly shake up the status quo, it also presents opportunities for savvy retailers to up their game and for consumers to access a wider range of products at lower prices.
In the short term, Amazon‘s entry is likely to put pressure on prices and margins as competitors race to match its offerings. Some smaller retailers may struggle to keep up and could face consolidation or closure. At the same time, Amazon‘s investments in logistics and technology could spur innovation and efficiency gains across the industry.
Looking further ahead, Amazon‘s impact on New Zealand retail will depend on how successfully it adapts to local tastes and preferences. Will Kiwis embrace the Amazon way of shopping, or will they stick with tried-and-true local brands? Will Amazon be able to scale its operations in a smaller, more spread-out market? And how will the government and regulators respond if Amazon starts to dominate the market?
As a keen observer of the retail industry, I‘ll be closely watching how this clash of Kiwi and corporate cultures plays out. One thing is clear: Amazon‘s arrival will bring both challenges and opportunities for New Zealand retailers and consumers alike. Those that can adapt and innovate will be well-positioned to thrive in the ecommerce age.
Key Takeaways:
- Amazon‘s expansion to New Zealand appears imminent based on local hiring and rollout of services like Prime Video and Audible
- New Zealand‘s ecommerce market is growing rapidly but still under-penetrated compared to other countries, presenting an opportunity for Amazon
- Amazon‘s launch in Australia offers clues to how it could shake up the NZ retail landscape, including increased price pressure, more fast shipping expectations, and new avenues for local sellers
- To compete with Amazon, Kiwi retailers will need to differentiate on factors like customer service, exclusive products, omnichannel integration, and membership programs
- Amazon‘s long-term impact on NZ retail will depend on its ability to localize to Kiwi consumer preferences and scale effectively in a smaller market
