25th Nov 2017
Online giant Amazon is expected to launch an Australian online store some time today, surrounded by the sort of mystery and hype other companies could only dream of.
Here are some ways the American behemoth is set to change the face of Australian shopping.
This could be big retailers’ ‘worst nightmare’
Scott Kilmartin, who produced a documentary called David vs Amazon about the company’s journey to Australia, says big retailers will bear the brunt of Amazon’s move.
“If you’re a JB Hi-Fi, Myer, David Jones… Amazon’s going to be really tough,” he said.
“Globally they’re the type of retailers Amazon has had a huge impact on.”
… but smaller operators could see some benefits
Mr Kilmartin says Amazon is “really good” for independent brands.
“You can go from selling on your own website to also selling on Amazon site,” he said.
“Amazon will effectively introduce a whole lot of new people, potential customers to your brand.”
That assessment is echoed by Russell Zimmerman, executive director of the Australian Retailers Association.
“If you’re an online retailer using their marketplace, you’re most likely a local retailer,” he said.
“So I think there’s an opportunity for local retailers to engage themselves with Amazon.”
There’s a price war coming
History shows it’s unlikely that Australian retailers will be able to win in a Christmas price war with Amazon.
“Amazon brings volume of purchasing to the table, but it also has the impact of bringing down prices — Amazon has very long pockets,” Mr Kilmartin explained.
“You’re effectively competing with a company that has more money and the ability to drive down prices for a longer period of time.
“Going into a price war with Amazon is particularly tricky … and you need to have deep pockets to stay in the game.”
Woolworths has announced plans to increase its online presence by the end of the year, but retail analyst Paul Broadfoot says larger retailers should not try to compete with Amazon on price.
“A lot of big retailers in Australia have their price match policies,” he said.
“[But] when someone comes to town who’s going to be the lower price, it takes their strategy away from them.
“I think local retailers need to focus a lot more on their customer and the format, than on prices as the primary weapon.”
But Amazon could be wary of the Canada effect
For years now Amazon has dominated the American marketplace, with more than 43 per cent of online sales going through the website.
It’s also the country’s eighth-largest employer.
But Mr Kilmartin says the Australian market is more like Canada, where Amazon has gained a foothold, but failed to destroy its rivals.
“Canada is similar to Australia — small population [and] large geography — and Amazon doesn’t have the penetration or the market share in Canada that it does in the US,” he said.