COMMENT: It's a distribution model but not as we know it

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Be afraid, be very afraid.

That seems to be the prevailing view of commentators and interested parties, who regard the full-scale arrival of Amazon in Australia as a retail equivalent of D-Day.

There are good reasons for certain retailers to be concerned.

A recent national omnibus survey by Nielsen found that more than half (56 per cent) respondents said they are likely to purchase from the mooted Australian Amazon site while 45 per cent said they would pay to become an Amazon Prime member in order to receive special discounts.

A survey by Citi Group showed the main sectors to feel the pressure from Amazon included consumer electronics, appliances, sporting goods, auto parts and office supplies.

Add to that list food and groceries – an area that has felt a massive tremor in the US and elsewhere with Amazon’s US$14 billion bid for retail chain Whole Foods, which operates a chain of 460 up-market stores known for stocking lots of “overpriced” organic foodstuffs.

The scary part for the office products industry is if Amazon showed an interest buying a large, national office products retailer, i.e. Officeworks.

Having cancelled its plan for a public float, Wesfarmers could be tempted to accept $1.5 billion (give or take a $100 million) for the 64-store chain - if it is indeed committed to off-loading the profitable division.

If not Officeworks (which is unlikely), Amazon may look at other Australian retail businesses that have a chain of stores that could form part of a large-scale national distribution network.

Regardless of the extent of market share that Amazon will take from established players, the biggest disruption that Amazon will create in Australia is a re-shaping of the supply chain.

If Amazon sets up massive distribution centres in Australia in the same way it has in the US, it could make life very difficult for wholesalers, specially when suppliers and manufacturers gets closer to Amazon Marketplace - an e-commerce platform that enables third-party sellers to sell new or used products at a fixed-price alongside Amazon's regular offerings.

The scary part for 'old school' distributors is that Amazon’s powerful computer systems are capable of tracking the location and movement of millions of items and they are constantly being upgraded and enhanced with innovations that will leave today’s middlemen in no-man’s land.

For example, Amazon is reported to be interested in buying the office messaging application Slack for US$9 billion.

Slack has five million users, including one million paid-up subscribers and its platform would conveniently plug into Amazon's suite of business offerings, providing a messaging and conferencing platform to tie its cloud computing and office tools together.

Analysts say that the number of Slack members could could swell to more than 100 million under Amazon, adding even more power to its business-to-business transactions capability while creating an effective platform for advertising.

Amazon is already a force in cloud computing through its Amazon Web Services and the addition of Slack is seen as a way establishing a beachhead in the cloud communications sector, currently dominated by the likes of Facebook.

In the long term, Amazon could disrupt the distribution model in the office products sector to the point that buying groups and wholesalers seriously start talking to each other about consolidation and supply chain efficiencies.

In the short term, some relatively small independent dealers are seeing the benefits of a co-operative arrangement, which involves the closure of individual warehouses and a greater focus on the sales process, both direct and online.

FOOTNOTE: Craig Woolford, director of research for Citi Australia/NZ, which has compiled a major report on the impact of Amazon on the Australian retail market, will be a speaker at this year's Stationery News LIVE conference in Sydney on 21 August.