The Company Amazon Can’t Beat Is Coming Down Under

Online shopping

Remember when Amazon.com, Inc. [NASDAQ:AMZN] was coming down under?

Last year the media couldn’t help but hype up the event. Take a look at a few of the following headlines during that time.

From news.com.au: Amazon Australia:Local retailers should be very afraid.

From the Australian Financial Review: How Amazon works – and why Aussie retailers are at risk of getting crushed.

Or what about this from The Sydney Morning Herald: Does Amazon Australia’s retail launch spell the end of eBay?

So has the Amazon effect caused the downfall of Aussie retail? Not really. You could argue consumer confidence is far more important at the moment.

But it was the safe bet to make.

There were countless examples of Amazon leaving competitors by the curb as they cut costs and increase their customer focus.

Book retailer Barnes & Noble, Inc. [NYSE:BKS] is a fraction of what it used to be thanks to Amazon. US apparel retailer, Macy’s Inc. [NYSE:M] has seen huge declines in sales thanks to Amazon’s aggressive cost cutting mentality.

Maybe it’s still too early. Amazon could still have a wide impact on the Australian retail industry. They’ve done it in America. Why shouldn’t they be able to do it here?

There is one place, however, that Amazon couldn’t crack. In fact, they are doing so poorly they might end up fleeing the country.

But on route to Australia, a beast from the east has followed Amazon.

But instead of competing they want to help by digitally transforming Aussie retailers.

Help from the East in a fight against Amazon

Why is Amazon so successful? You could ask the same of hundreds of other successful businesses and the answer would be the same.

They focus on added value for the customer.

If customers want faster delivery times, Amazon will do it. If they want better products for cheaper, Amazon will cut prices. If customers want to return items, Amazon makes it extremely easy.

Unlike most businesses that want to profit next quarter or next year, Amazon is playing the long game. What’s made them so successful is delivering value to customers.

This doesn’t lead to short-term profits. And that’s probably why so many businesses aren’t real long-term successes. 

But imagine trying to topple the king of online retail? Even with billions of dollars at your disposal, it will probably be impossible to toss Amazon from their mantle.

Yet in China, hardly anyone shops on Amazon. They make up less than 1% of the giant e-commerce market there.

That’s because even Amazon cannot compete with two retail dragons in the Red Kingdom — Tmall.com and JD.com.

Money Morning 18-05-18

Source: eMarketer

[Click to open new window]

And it’s the latter who’s followed Amazon down under. Reported by the Australian Financial Review (AFR):

Chinese retail giant JD.com could offer technologies such as unmanned checkouts, facial recognition-driven marketing and automated fulfilment to Australian retailers within 12 months, as the giant ramps up its “retail as a service” push.

JD.com. which opened its first Australian office in Melbourne in February, is focusing on helping Australian brands join its giant Chinese market place, and shift into its new target markets of Indonesia, Thailand and Vietnam.

But boss Patrick Nestel says JD.com’s Australian arm is part of the company’s global push to make “retail as a service” a substantial revenue stream over the next decade.

“We are optimistic we can make that a new revenue stream (in Australia) in the next 12 months,” he told The Australian Financial Review.’

So how would JD.com digitally transform Aussie retailers? How about in-store advertising with facial recognition? Or what about artificial intelligence assistants? The AFR continues:

‘…while JD.com wants to expand its footprint of stores – it will mainly look to do so through franchising – it also sees the opportunity to offer these products to existing retailers.

Mr Nestel said JD.com had already done this successfully through logistics, where it had graduated from offering marketplace partners the chance to perch on JD.com’s giant logistics and warehousing systems, to offering these supply chain services to third parties.

He cites Walmart as a prime example. While the US retail giant has a standalone business in China, it also sells online though JD.com and the Chinese giant has now taken over fulfilment through both channels.

The sale of technology services such as unnamed cash registers, automated fulfilment and reactive advertising is likely to be on a “mix and match” basis, Mr Nestel said.

Much will depend on a retailer’s needs and ability to retrofit technology in existing stores and warehouses.

While many tech giants want to be seen as disrupters, Mr Nestel said that JD.com can “become an enabler” by rolling out these technologies to the broader market.

And it’s not just retail where China is looking to digitise the world. China wants to become a leader in logistics, AI research, quantum computing and many other industries. Their path to the top, according to China, will be paved with technology.

The best part is there’s a huge opportunity for you to make a lot of money as China continues to climb.

Getting in on the action

Only few doubt plenty more growth will be coming from China. It’s why so many of the world’s best stock pickers are keeping a close eye on China in 2018.

Berkshire Hathaway’s second in command, Charlie Munger, has even said ‘thebest companies in China are cheaper than the best companies in the United States.

I don’t think it would be all that hard for any smart person to find four or five great companies in China to invest in.

A huge consumer base, a thriving tech industry and potentially more economic reforms to come. Investments with exposure to China could cause your wealth to literally erupt.

It’s one of the mega trends I’m currently focusing on in my new advisory service, Wealth Eruption.

Within two week’s I’ve found five ASX-listed stocks, all with a good chance to significantly rise on the back of China.

On Tuesday I told my subscribers I had another recommendation in the works. It’s another stock that could potentially erupt as China continues to roll out technology all over the world.

You can learn more about my service here.

Your friend,

Harje Ronngard,
Editor, Money Morning

Harje Ronngard

Harje Ronngard

Harje Ronngard is the lead Editor at Money Morning. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.

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