If the hype is to be believed, Amazon will be targeting Australia from Sept. 2017 with extreme prejudice.
“We are going to destroy the retail environment in Australia,” an Amazon staff member is reported to have said, according to the Australian Financial Review.
While Australians can already shop on Amazon, spending about A$500 to A$700 million according to research published in August by Citi, international shipping rates and wait times can be a deterrent.
The rumoured launch of local distribution centres could make all the difference though, and while Amazon has been coy on offering any details, it could also launch its Prime subscription that guarantees free two-day shipping as well as access to its streaming service, Prime Video.
If it enters the market in the next two years, Citi estimates Amazon could reach A$3.5 to A$4 billion in sales within five years of launching, capturing around 14 percent of all online sales.
Amazon is known for acting aggressively, but will it be the annihilation so many are predicting?
Local online business have different opinions on the matter.
The optimist, to a point
Beauty retailer Adore Beauty is a local digital success story, expanding into China this year via Alibaba’s TMall platform.
Kate Morris, founder of Adore, told Mashable digital retailers have been competing against international merchants for years.
Naturally, she offered a optimistic outlook for specialist retailers like herself. “We can compete on a better depth of knowledge for our particular vertical,” she said. “[Amazon is] not that influential a player as far as premium beauty.”
Her customers tend to prefer other beauty specialists such as Mecca or Sephora, she added, noting that Amazon is not something that comes up often in their consumer surveys.
Still, there is no competing with Amazon on logistical efficiency if the company decides to open fulfilment warehouses locally. It may set a new local standard.
“You’ve certainly got to keep up, but you’re probably not going to win,” Morris said.
That means any retailer not adding value in terms of customer service or a unique brand proposition — in other words, purely transactional sites that compete solely on price — are going to come up against some serious competition.
Citi predicted electronic retailers like JB Hi-Fi would feel the greatest impact, with sales potentially dropping by six percent.
“If you’re going to compete on price, you better be the biggest or have some sort of supply chain efficiency that’s going to allow you to offer a cheaper price,” she said. “You’d be hard pressed to deliver on that up against Amazon.
“It has the potential to be extremely disruptive, because I think there are a lot of lazy retailers in Australia,” Morris added.
The skeptic with an eye on eBay
Nati Harpaz, CEO of deals site Catch Of The Day, is not 100 percent convinced by the Amazon rumours.
He told Mashable he was undecided whether Amazon was coming to Australia in 2017 at all, adding that he’s yet to hear from any of the warehouses or local suppliers the company would need to get started.
“I think there’s a lot of media hype, but no substance to it,” he said.
Despite this, Harpaz predicts Amazon could do some damage to big box stores should it arrive.
“The difference between what Amazon does and some of the big chains, is Amazon has access to cheap capital because they raise money and they’re willing to fund their losses,” Harpaz said. “That’s a hard thing for anyone to compete with.”
He also suggested international competitor eBay could be both a challenge and a target for Amazon in Australia, something Citi agreed with.
Amazon makes about one third of its sales from third-party retailers who sell on the website, Citi wrote. That’s a space eBay dominates locally along with a 22 percent market share of all Australian online sales.
Still, Harpaz pushed back on the notion Amazon could offer a fully fledged Prime service locally from 2017, thanks to Australia’s relatively high postal costs.
Shipping and fulfilment are definitely Amazon’s sweet spot, however.
According to Citi’s analysis, Amazon is likely to convince local customers by making itself known, as it is in other markets, for impossibly swift service. Overseas, it has introduced regional sortation and delivery centres in addition to major fulfillments sites to “improve the ‘final mile’ experience for consumers.”
Those are expenses local retailers might find it hard to match, although the shipping phenomenon has been accompanied by criticism regarding Amazon’s treatment of its warehouse workers.
Despite Amazon’s logistical expertise, Harpaz suggested Prime may not be fully fledged in Australia if it does indeed launch in late 2017, at least not immediately.
“Amazon only offers Prime on goods that they stock,” Harpaz said. “It’s mostly available on things Amazon has in its own distribution centre or that they do the fulfilment for other suppliers.
“To do that in Australia, it’s going to take them a bit of time.”
An article by Mashable