Amazon is hoping to launch in Australia in September. Photo/AP
Australian retailers are woefully unprepared for the imminent entry of US tech giant Amazon and many could go under if they don't lift their game.
The online goliath is due to hit Aussie shores this September but a new analysis shows almost a third of Australian retailers are blissfully unaware Amazon is preparing to set up shop, according to news.com.au.
Only 14 per cent have put any serious thought in to competing with global brand. This blissful ignorance could be a huge mistake.
While some of the smaller retailers unaware of Amazon's plans could be hit hard, an analyst told news.com.au one of Australia's major stalwarts could suffer greatly: Woolworths' struggling discounter Big W.
The Commonwealth Bank Retail Insights Report, released today, found 49 per cent of retailers are unfazed by Amazon's Australian push, with only 11 per cent seeing the company as a significant threat to their business.
Yet, in the US the so-called 'Amazon effect' has seen its share price skyrocket as shoppers flock online, while bricks and mortar retailers shutter shops.
CommBank's National Manager of Retail, Jerry Macey, told news.com.au many Aussie retailers had no idea what they were in for.
"30 per cent of retailers said they aren't even aware of Amazon and that was even bigger number for small companies, purely online stores, or retailers in rural areas.
"This is concerning when you consider the impact Amazon has had on the US, a very mature market."
The key area where retail is falling behind is innovation.
CommBank measured levels of innovation across a range of Australian industries.
While half of Australian retailers were experimenting with new strategies to attract and retain customers - just above the all industry average - they still lagged behind the telecommunications, education and mining and sectors.
Worryingly, retail innovation was erratic, often uncoordinated and the value retailers were generating from trying new things was less than half that of the average of all other sectors.
"In retail, innovation is not holistic. There are small innovations, in one area of business, but if you look at strong innovators they are being innovative across a number of areas like marketing, organisational structure, product and process," said Mr Macey.
The online innovations that were occurring in retail, like click and collect, weren't game changing and were way behind industry leaders.
"Just look at Amazon Go - this is a physical store where you pick things off the self and sensors know what you've put into your bag and you can just walk out - that's innovation," he said.
Geoff Dart, a retail consultant with DGC Advisory agreed Amazon would change Australian retail.
"They will have an impact. If you're a retailer, you always have to assume the worst when Amazon comes in."
The US company was the next wave in a retail revolution sweeping across Australia's high streets and shopping centres already changed forever by the emergence of international fast fashion brands.
But, said Mr Dart, new competitors - such H & M, Zara, and Uniqlo - had already forced some home grown stores to buck up their ideas. As such, many were now far better prepared for the onslaught of Amazon.
"Australian retailers were very complacent, but if you look where they are now Myer has really lifted, and so have Kmart and Target."
Rather than battling against the overseas onslaught, Myer is now actively working with would be competitors - such as TopShop and UK department store John Lewis - by stocking their products.
However, there was one long standing Australian retailer that Mr Dart was worried about.
"Big W don't know who they are in my opinion, they are stuck in the past while Amazon know who they are have a good customer proposition."
In the six months to January, Big W's sales slumped 6 per cent while its earnings fell 137 per cent leading to a loss of $27 million.
News.com.au contacted Big W to ask how they were innovating, fighting back against increased competition and bringing in new customers. The company chose not to comment.
Following Woolworths' closure of the Masters home improvement chain late last year, speculation is rife that the company is preparing the ground for either a sell-off or float of Big W.
Nevertheless, Mr Dart didn't think Amazon would get a completely free ride when it lands.
While last week Fairfax reported that Amazon is planning to "destroy the retail environment in Australia", Australia's huge size and relatively small population would mean Amazon's warehouse and distribution costs would be higher compared to other markets.
In particular, Mr Dart said Amazon would struggle in a key area which will please Coles and Woolies.
"They're going to fail at food. Australians are very conservative when it comes to food and if they have a bruised banana in their delivery, Amazon is going to have to replace it and that's not going to happen."
For Australian retailers, their trump card was their store network, he said, as it gave brands a presence on the ground.
Mr Dart predicted further consolidation in the sector, citing JB Hi Fi's recent purchase of The Good Guys.
But the real innovation could be if competitors started working together to combat the international online threat.
"Retailer co-operation is a big opportunity. Why couldn't you pick up a JB laptop you have ordered online from a Bunnings or Kmart? All of them have fixed costs and want to amortise that and one way of doing that is to increase traffic and people picking up goods is a way to do that."
Mr Macey said some Aussie retailers were being ingenious at innovation.
He cited efforts to 'personalise' the shop by allowing customers to visualise online a new rug in their living room, say, or how they would look wearing a new shirt.
However, on the whole, retailers needed to have an innovation reality check.
"Retailers need to be honest in where they are in terms of their ability to innovate. They need to take advantage of changes in the marketplace, experiment, not be afraid to fail but if they do fail, fail fast and inexpensively.
"Retailers need to build a innovation culture and be agile and creative in the future."