The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian merchants are facing “sleepless nights” in a race to adapt after being “blindsided” and “side punched” by Amazon’s move to offer ‘free delivery’ to local consumers on certain purchases over $49.

Mark A Turnquest, founder of the fledgling 242 Small Business Association and Resource Centre, and a consultant to many clothing and electrical goods retailers, told Tribune Business yesterday that clients and members in those industries are rapidly assembling teams to determine which - if any - of their product lines will be impacted by the online retailer’s strategy.

The world’s largest e-commerce marketplace, while asserting that the ‘free delivery’ promotion presently has no end, said it only applies to “eligible products” that have not been defined publicly. Mr Turnquest said his clients are taking some comfort from the fact Amazon’s move does not apply to all goods, as this means not all of their own product lines will be subject to intense pricing and other competitive pressures.

However, the Mark A Turnquest Consulting chief said the sudden disruption caused by Amazon’s strategy was especially ill-timed for Bahamian retailers given that it has occurred just when they are finalising preparations for the ‘Black Friday’ to Christmas shopping period that for some generates 75-80 percent of their annual sales.

While it may be too late to adjust pricing and inventory levels, as much Christmas merchandise will have already arrived, Mr Turnquest said many retailers now face the prospect of having to pay extra overtime to staff as they assess how much of their offering may be affected by the world’s largest online retailer and its aggressive distribution strategy.

“What they have to do, and it’s amazing, surprising, but they have to do it,” he told Tribune Business. “They have to do their market research and look at what Amazon is selling in reference to their inventory, and look at which products will be impacted negatively.

“It might be, say, be only two or three but, depending on what they are, that could take dollars off their profitability. If it’s 15, 20, 30, that’s a lot of product lines and then they’ll be very concerned. They will have to go back to the table. 

“They weren’t expecting this. They will have sleepless nights between now and the end of the month. They have to bring a team together to go through their inventory to determine the impact. They were side punched by this.”

Concerns have also been voiced as to how due Customs duties and VAT will be levied on Amazon’s ‘free delivery’ shipments, and who will be responsible for paying them, as well as the possibility consumers may be hit with so-called ‘hidden fees’ and charges. The Bahamas’ consumer watchdog, the Consumer Protection Commission, is seeking details from DHL on how the initiative will work by today.

Mr Turnquest, meanwhile, said having to adjust to the competitive threat posed by Amazon was distracting retailers from their Christmas preparations. “Black Friday to January, that’s when a lot of retailers make 75-80 percent of their profits,” he added. 

“They are very disappointed that Amazon has done this knowing we have a small economy, knowing we can’t withstand that Amazon influence with the end consumer. They are very disappointed that Amazon is doing this.

“But this is business and there are no friends in business like that. They have to go back to the drawing board, and a lot of them have to put together a team of two to five staff inside their business using some overtime pay to determine what products will be impacted,” Mr Turnquest said.

“They have to go through their product line, then they have to go through Amazon’s product line to determine what items are included in this ‘free delivery’ and have the most major impact on profitability.” However, he added that small Bahamian retailers are drawing some comfort from the fact the online giant is not offering ‘free delivery’ on every item.

“They are somewhat relieved that there are only selective products being sold with this free shipment,” Mr Turnquest said. “They do not know exactly the range. They have to do their own investigation. It’s not straight across the board, but they say it’s going to impact them one way or the other because if one product is not impacted then another will be. A majority of retailers in this country are concerned.

“It all boils down to customer loyalty, customer service and availability, access and response to complaints. It boils down to whatever the end-consumer wants to do.” Mr Turnquest said small Bahamian retailers had always known the competitive threat from e-commerce was there, but had been expecting it would come from Bahamians seeking to replicate this model rather than Amazon itself.

“They were surprised Amazon is doing it directly,” he added. “A lot of organisations wanted to do similar things online but didn’t have the ability and scope and funding mechanism to make available a vast array of products at affordable prices with convenient and timely delivery.”

Mr Turnquest called on local shipping companies to better enable Bahamian merchants to compete with the likes of Amazon by improving their customer service. “Eighty-five percent of my customers and members say they get poor service from at least 55 percent of shipping companies,” he added.

“They’re not happy with their shipping companies, but they deal with them because they have no other choice and Peter is no better than Paul. They are going to speak to the shipping companies to up their game to be more customer service oriented because they say they are not good on this.”

But, while Bahamian retailers harbour both short and long-term misgivings over Amazon’s initiative, Mr Turnquest said it was simply too late to adjust inventories and prices for the Christmas season with merchants not worried that they will be forced out of business over the next few months. “The engine has already rolled,” he added.

“My clients will have to go line by line to see what the gross margins are on their products. If gross margins are high, they have to put some serious emphasis on buying and reducing shipping costs. If it’s a loss leader product that attracts more business to their store they are not going to hurt their head.”

Mr Turnquest also urged Bahamian retailers to get creative by “bundling” products, and employing discounts and offers, such as reduced prices on necklaces and shoes if someone buys a dress.