With the official start date of Amazon Australia's operations locally being today, the reported fears and apprehensions of Australian retailers over the past decade have now been realised. As the media have built-up talk of the negative impact upon retailers, having seen Amazon's effect upon similar businesses in the US and the UK, we look ahead to the likely benefits to retailers set-up as companies in Australia using the Safe Harbour provisions in the Corporations Act.
For Australian retailers trading as a company, if experiencing solvency issues as a result of any increased competition from the new market entrant, or for many other reasons, Safe Harbour protection may apply. While much of the media focus on Amazon's move into the Australian market may have focused upon the 'bad news' or hype surrounding the anticipated impact to local retailers, we would say in our experience that any retailer with a good product or service to sell at a good price with great service to a defined market, or those that seek to harness these qualities in their business, can adapt, restructure, and survive - even more so now with the Safe Harbour protections.
Obviously, as with any other company director seeking protections or immunity provided by Safe Harbour laws, the following requirements, as highlighted in our previous blog post 'ARITA releases its Safe Harbour Guidance for Directors', must be successfully addressed:
1. Get your accounts and records in order
2. You must get expert help
3. You must properly inform yourself of your company's financial position
4. Develop and implement a restructuring plan for the company
If the company's financial position, as informed by the expert, does indicate that Amazon's entrance to the Australian retail market has had a negative effect upon the business, the plan in step 4 should necessarily set out a clear approach to minimising or mitigating this competitive threat as part of any viable restructure.
Such methods of minimisation or mitigation may include:
- consolidation of product lines/service offerings
- a move to online selling
- a move to 'bricks and mortar' retailing
- hiring employees with a focus on improving service delivery
- investing in IT to automate and streamline point-of-sale, and/or product ordering
- moving stock and warehousing functions to a third-party fulfilment provider
- vertical integration to invest in/buy-out a supplier
These are just some of the practical ways that a local Australian retailer may plan to benefit their business from the 'Amazon Effect'.
Of course, for retailers set-up as sole traders, now might be a time to restructure as a company. Any additional compliance burdens may be outweighed by the benefits from operating through a company, including the availability of the Safe Harbour protections.
Contact Us to discuss your retail business and how our expertise could help you take on and beat the Amazon in the market.