Amazon is coming to Australia: what does it mean for local retailers?

The last year was probably the best time in Amazon CEO Jeff Bezos career. His online shopping even started to follow Australian brands. However, experts cannot find the answer how the retail giant will affect local brands.

Jeff Bezos earned the greatest revenue in 2016 and jumped high in 2017 World Billionaire List with a net worth of $US26.7 billion ($34.5 billion), Forbes reported last week.

At the same time, market analysts started to concern about traditional Aussie retailers (Myer and JB Hi-Fi) because the Amazon want to set up shops in Australia.

While the company has not announced any formal plans to start its business in Australia. It is known that the retail giant wants to expand opening warehouses Down Under that will enable cheap, fast local shipping, and letting small businesses sell goods through its website.

A spokesperson for the Amazon stated that the company is currently planning “to bring thousands of new jobs to Australia, millions of dollars in additional investment, and to empower small Australian businesses through Amazon Marketplace.”

“We are optimistic that by focusing on the things we believe customers value most — low prices, vast selection, and fast delivery — over time we’ll earn the business of Australian customers,” he added.

Amazon have already registered 250 trademark applications here, and every local retailer is now full of worries about how hard situation will be for their businesses. Analysts at Morgan Stanley called Amazon a “country killer”. Analysts from Credit Suisse are pessimistic too about the future of Myer, JB Hi-Fi and Harvey Norman, reports Business Insider.

They suggest that Myer’s earnings before interest and tax could fall by as much as 29% in the 2022 financial year if Amazon arrives. Analysts highlighted the gap in price points between Amazon and retailers like JB Hi-Fi and Harvey Norman.

As previously reported by Citi, it is indicated that if Amazon penetrates the market in the next two years, they could reach A$3.5—A$4 billion in sales within next five years and take around 14 per cent of all online sales.

Local retailers are ready to fight

Australian supermarket heads and startup founders are making plans how to fight global international retailers like Amazon, and there are three common approaches.

Ruslan Kogan, the chief executive of Kogan.com has previously claimed the possibility of an Amazon arrival will increase the quality of Australia’s online retail landscape.

“At a high level, the potential arrival of Amazon means the biggest, hottest brands will have no choice but to put products and significant volume through online channels,” he said at the company’s annual meeting in November 2016.

However, there is a group of retailers that are not in the same positive mood. They are creating their own forces of experts that are implementing new ideas and building strategies able to beat Amazon. In 2016, reports emerged that Woolworths has an “Amazon Taskforce” in place.

Moreover, some retailers are speaking openly about the battle with the giant and saying they will compete by providing better offers and cheaper prices.

For example, retail veteran Gerry Harvey promised earlier this year to “price match” with Amazon across his Harvey Norman: “We will give [shoppers] the service, delivery and after sales service and they will be a lot happier.”

Following the example of Harvey, during the discussing about department store’s half year results last week, Richard Umbers, the Myer chief executive promised that his company refuses to give Amazon a “free kick, and is instead focused on creating a store offers that gives shoppers a better option”, reports The Australian.

People are panicking too early

Dr Gary Mortimer, retail expert and associate professor at Queensland University of Technology Business School, are soothing things down by claiming that he has seen some quite “alarmist” numbers on the potential impact of Amazon’s arrival that may not be the truth.

He says that some product areas, like consumer electronics, are vulnerable to Amazon’s lower prices; however, there are other categories that are much less vulnerable to Amazon’s business model.

“Amazon is simply a platform, much like eBay,” Mortimer says. “People are making big claims, and some of them are being quite alarmist.”

“There are other areas that are less exposed, like food. At the moment, remember that with Australian online spending, the total percentage is like 7% of sales,” he added.

Amazon will not suddenly force to close all supermarkets in the country. The ongoing development of retailers and shopping centers shows in-person retail is still a matter of buying in Australia, says Mortimer.

“We’re not going to stop going to shopping centres — and you can’t get that experience, just sitting there [shopping] on your tablet.”

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