Amazon is coming to Australia: What does this mean for Australian retailers?

Online retail giant Amazon has set a date for its Australian website launch for the end of 2018 offering more products at a cheaper price, faster delivery times and even groceries. But what will this mean for Australian bricks and mortar retailers and E-commerce?

As the top US E-commerce retailer in 2016 with a 74.1% share of total E-commerce sales, Amazon is a looming presence over the Australian retail market.  With a date set for the late 2018 launch of their online Australian store, their presence could spell danger for the local market.

A welcome market

When speculation peaked in Amazon’s move into the Australian market, a Nielsen Survey showed that 75% of Australians aged 18+ were interested, and 45% stated they’d sign up for the paid Amazon Prime membership for faster shipping and other perks.

Although Australian consumers can and do already purchase from the American site, Amazon Australia will offer faster shipping and local warehousing, reducing the delay users currently experience from international shipping.

A serious threat

The interest from Australian consumers could spell trouble for traditional local bricks and mortar stores who cannot supply a similar product offering. Key competitors such as JB Hifi, Myer, Harvey Norman, Rebel, Amart Sports, Kmart, Big W and Target could potentially see a drop in revenue, with predictions for Myer losing 55% revenue over 5 years.

Reports that Amazon’s strategy is to undercut local retailers by 30% shows that the online E-commerce powerhouse is coming in swinging, yet former Wesfarmers CEO Richard Goyder doesn’t see Amazon as a threat, stating: “We’re not worried about Amazon or anyone else.”

Prime offering

Amazon has revealed that they are offering a range of services to the Australian market, including Amazon Prime Now, and new services Amazon Fresh and potentially Amazon Go.

 PHOTO: istock

What is Amazon Prime Now and how will it affect Australian businesses?

Amazon Prime Now will be launched with the Australian version of the site, offering fast, free shipping to members as well as the existing range of perks already available to Australian users such as live streaming video, music and books.

Current bricks & mortar and E-commerce model offered by leading Australian companies, however, do not compete with similar offers, creating a large opportunity for Amazon to win market share.

What is Amazon Fresh and how will it be implemented in Australia?

Amazon Fresh is a grocery delivery service that will launch in Australia to coincide with the website, and will directly compete with Woolworths and Coles online shopping.

This will be an interesting segment, as it will directly affect Australian farmers and producers of fresh food and supermarket goods – an industry that is already struggling for fair pay – if Amazon Fresh offers an even greater discount.

What is Amazon Go?

Amazon Go is a chain of real life, checkout-free supermarkets that automatically bill shoppers via smartphone payment upon exit. Products are electronically tagged, shaking up the grocery industry as well as potentially local employment with the reduction of staff.

Amazon have stated they will hold off on implementing Amazon Go until comprehensive data analysis of the Australian Amazon offering has been completed to determine viability.

Where to from here?

Australian retailers and E-commerce stores need to analyse Amazon Australia as a serious threat to market share and profitability in order to find opportunities to compete with one of the world’s largest online e-commerce platforms.

With reports from analysts briefed by Amazon that they want to “destroy” the Australian retail industry, the next couple of years could see a huge change in the way we shop online.