Amazon Freight Train Slams Another Aussie Brand

Amazon Freight Train Slams Another Aussie Brand

Oh-uh, Amazon just claimed another victim. Say goodbye to the Amart sporting brand.

Yesterday Super Retail Group [ASX: SUL] announced it’s going to dump Amart from its sporting division after a strategic review of the business.

It’s not job losses and store closures, but all Amart stores are going to be rolled into the Rebel Sports franchise.

Super Retail wants a united front as Amazon and European player Decathlon encroach into its market. Amazon is a major player in sporting goods in the USA.

I’ve been making the case that Amazon is and will continue to drive every Aussie retailer to rationalise its business and optimise every part of their operation to fend off the US giant.

Now we’re seeing it in real time.

Chief exec Peter Birtles is quoted in The Australian this morning as saying,

Focusing on the Rebel brand will enable us to offer customers an expanded range of solutions and services at more locations, concentrate our investment building world class omni retail capabilities, and further streamline the end-to-end supply chain required to deliver the seamless omni experience that customers expect.’

Indeed.

The biggest handicap Amazon has is that it doesn’t have an existing logistical network in place in Australia already.

So here’s a thought: would Amazon buy an Australian super market chain to get one?

Is a repeat of the Whole Foods deal
here really so crazy?

You can’t help but wonder after reading The Australian yesterday.

Research from a firm called IBISWorld concluded that, of all the retailers here, the Aussie supermarkets are best placed to fend off the threat from Amazon.

That’s because the big supermarkets’ already have a pretty solid logistics chain in place and their large store networks across the country.

Apparently most people have a preference for seeing and touching food before buying it, too. That means the grocery sector might see less online disruption than, say, electronics.

Here’s the kicker, though…

Amazon has so much money it could simply take over one of the supermarkets completely if it really wanted too. We’ve already seen that play out with Whole Foods in the United States.

In a way , such a move makes more sense here in Australia than it does in the United States because Amazon is so further behind.

Now, the margin the supermarkets make is not particularly appealing to justify the cost of such a large takeover offer.

But the existing logistic networks from an existing supermarket have could be tempting if Amazon combines that with the ability to instantly track your shopping history and the data it generates.

Because from this can springboard a superb profile of you as a consumer. You could then be sold or targeted for banking and insurance products, for example.

Perhaps the biggest objection to such an idea is that Australia is just not a big enough market for Amazon to concentrate on.

But the biggest defence Aussie retailers have now is the headache Amazon has of catering to a population spread over such large distances.

Hmmm.

Reflect a moment on the shuddering fear that would go though the Aussie retail sector — again — and investors — again — if Amazon made a play for one of the supermarkets.

That’s enough to make the bravest investor cautious around retail stocks.

For now, I’d consider an Amazon takeover like that low probability. But you can’t discount it completely.

Don’t let the losers distract you
from the winners

Having said that, I’m wildly bullish on any company I think can benefit from Amazon’s arrival.

I have two in my sights right now, and think there’ll be plenty more to come.

This is a trend to follow for at least the next five years.

And yes there are companies that can benefit. Just take a look at a small Aussie company called ezyCollect…

This is one of the most positive businesses I’ve read about.

Every business owner, especially of small firms, knows cash-flow is the absolute lifeblood to keep it going.

So any backlog of unpaid invoices is a potential disaster. There’s always the constant pressure of costs, like wages and rent, to contend with.

Well, EzyCollect’s software tracks all open invoices, and what money is owed, and by whom, for any business using it.

It also sends reminder notices for unpaid invoices and even accepts online payments. As a company, EzyCollect has doubled revenue every year since it launched in 2014.

Well, EzyCollect just won a contract that will mean it could be endorsed to 350,000 MYOB users in South East Asia.

It’s able to target these international customers because it’s run over the cloud.

There’s no border constraints on business models like this.

The cloud has flourished because of Amazon’s pioneering build out of its Amazon Web Services platform.

This helps little companies like EzyCollect to do things like this.

It also means Aussie companies now have a worldwide market to target in a way that simply wasn’t possible in the past.

EzyCollect doesn’t trade on the ASX, but it’s a fine example of some of the tech innovation happening in Australia.

There are other great business using the same business strategy that DO trade on the ASX.

And, very soon, I’m going to help you find them…

Best wishes,

Callum Newman
Editor, The Daily Reckoning Australia