Remain unprepared, and Amazon and Netflix will devour your marketshare

Global behemoths Amazon and Netflix are a serious threat to Australian businesses. Why? In our fossilised media landscape, they have learned to evolve, writes Paul Broadfoot.

The onslaught of change has moved beyond simply hearing about it in our news and social media feeds, to impacting our buying behaviours and people we know.

Seven major fashion retailers have closed in Australia since the beginning of this year. Telstra has just announced it is shedding 1400 jobs. Roy Morgan Research reports that Netflix has the eyeballs of 5.75 million Australians, whilst Chanel Ten is in voluntary administration.

Digital technology and the change it engenders is exponential in nature. That means that whilst small beginnings are difficult to see, exponential growth over time, eventually brings the freak wave. When the wave makes shore, it does everything from give organisations wet feet, to erode old business models. In some cases, like Blockbuster, Kodak, Dick Smith, Sharp and Nokia there is a wipeout.

Enter the Elephant on the surfboard. Amazon is bringing their retail offering to Australia, and in their words, will deliver “low prices, vast selection, and fast delivery”. Their own growth has been following an exponential curve. Last year they grew just shy of US$30B to US$136B. That makes them 25 times larger than Harvey Norman by revenue and that’s without converting our AUD into USD.

Global entrants, into Australia’s hearts, minds, purses and wallets, is not new. Nestle, Sony, Toyota, eBay, Aldi, ING and more recently Uber and Airbnb are examples of internationally headquartered companies that have prospered here.

Australians have shown a willingness to share their spend, and spend their share, with overseas organisations. Although Starbucks remains a fascinating exception. But there is something different about Netflix, Apple and Amazon when it comes to their offerings and their histories. These companies have repeatedly innovated their business models.

Netflix has had three main business models:

1. DVDs by mail, a physical product distribution model

2. Movies and TV shows via streaming, a digital product distribution model, and

3. Making its own content like Orange is the New Black, a digital product creation model.

The first one killed Blockbuster, the second Presto (with Foxtel also now posting multimillion dollar losses), the third is challenging free to air TV and studios alike.

Apple has innovated into new business models too. Traditionally it designed and created physical products, until it changed the prevailing business model of the music industry with iTunes, shifting to distributing other’s digital content.

And now, Apple Music is cannibalising iTunes in response to Spotify and other music streaming options.

Bradfoot: Consumers love better, cheaper and faster

There are three different business models in that lot alone.

Amazon has always been one of the poster-childs for online business. A business that has shuttered bricks and mortar behemoths like Borders and Barnes and Nobel.

The business that began with books and a garage now has an array of new business models. Ironically, one of them uses plenty of bricks and mortar in the form of enormous fulfillment centres.

Amazon is more an ecosystem of business models all designed to sell the consumer as much of their retail needs as possible.

Some of the breadth of Amazon can be conveyed by listing company examples in sectors they compete in – Harvey Norman, Myer, Coles, Netflix, Apple Music and Booktopia to name but a few.

Not to mention, they are the leading provider of web services in the world by a large margin. Amazon Marketplace offers the chance for businesses to sell via Amazon, thus expanding their reach, storing their products, providing their logistics and even offering their customer service.

And Amazon, like Apple, now design a few products of their own: Kindles, Echos and Alexas. The latter sits on your table at home and you ask it the weather, to put things on the shopping list, find information on the net and to control any smart home devices like lights.

It’s your Artificially Intelligent assistant, and Amazon currently has a US$2.5 million competition on offer to US colleges for any team that can improve Alexa’s conversational capability.

Each time a business model is innovated, and the prevailing way an industry operates is shifted, a rare thing happens.

For a while, the innovator can be better, cheaper and faster. It’s usually not possible to be all three.

Companies like Netflix, Apple and Amazon are demonstrating a new type of differentiation, one that focusses on innovating their markets, not just their products.

Consumers love better, cheaper and faster. That means dollars will move to Amazon. How much will depend on what the rest of us do with our business models.

Paul Broadfoot is an entrepreneurial strategist and the author of Xcelerate: Innovate your Business Model, Disrupt your Market and Fast-hack into the Future. 


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