Amazon's Arrival In Australia (Digital Cheat Sheets)
Five Article Summaries To Bring You Up To Speed With Amazon's Arrival In Australia
Learn how Amazon transformed the US market, discover how they are expected to disrupt the Australian market, and find out why some experts believe they’ve bitten off more than they can chew.
1. Amazon In A Nutshell (From The Horse’s Mouth)
Why It’s Important: Quickly get up to speed with Amazon’s various product lines, review business performance and understand key objectives for coming years.
- Strong Sales Growth: 2016 Q4 revenues reached $43.74 billion, up from $35.75 billion last year.
- Market Forces In Their Favour: Amazon’s 19% direct ecommerce growth is not to be sneezed at, but it is only moderately higher than forcasted industry averages for the US and UK (15% and 16% respectively).
- New Territories: In 2015, Amazon reported $45.2B in revenue from non-US markets. The lion’s share of this came from three countries (Germany, Japan and the UK). Whilst Amazon’s other non-US markets are still well behind, they still grew by 52% over the past year.
- Investing In Growth: Amazon invested almost 5% ($6.7B) of their total revenue into things like cargo hubs, warehouses and Boeing 767 leases.
2. Here’s What All The Fuss Is About...
Why It’s Important: Amazon has innovation on their side. If you’re not already familiar with Amazon’s diverse offerings, watch these videos and you will begin to see how they plan on disrupting retail as we know it.
Amazon Prime lets customers get the physical and digital products they want, fast. In the US, they boast over 50 million products - including groceries - that can be delivered to your door in as little as two hours.
Amazon Go is a disruptive shopping experience that lets customers walk into a store, pick up the goods they want, and walk right out without a traditional checkout process.
3. Amazon Topples Big Retail In The USA
Why It’s Important: Aussie retailers are not the first ones to go up against Amazon. Traditional retailers in the US have suffered significant losses as a result of their inability to innovate and adapt. Now Aussie retailers must learn from their mistakes or suffer the same fate.
- Old Giants Feeling The Pinch: Three major US retailers (Macy’s, Sears and Kohl’s), have announced the closure of hundreds of stores, tens of thousands of job cuts and plummeting share prices, as a result of competitive pressures against online giants like Amazon.
- Amazon Continues To Thrive: This comes as a stark contrast to Amazon reporting its best holiday period ever - selling more than a billion products worldwide.
- "Immune" Segments Have Suffered: Steve Odland, a former top US retail executive, has said Australian retailers could suffer the same fate unless something dramatic were to change. He highlighted that industries that were once deemed immune from online threats (e.g. clothing businesses), were now being consumed by Amazon.
- Protected For Now: Businesses that provide a unique in-store experience or specialise in luxury products, were expected to be most protected from Amazon’s advances.
4. Amazon In Australia: A Disruptive View
Why It’s Important: Some retailers have chosen to bury their head in the sand ahead of Amazon’s arrival. However, estimates suggest that unless properly prepared, Amazon could pick up significant chunks of market share almost overnight.
- Watch Out Electronics: Analysts expect consumer electronic stores will be amongst those most impacted. According to studies by Citi, JB Hi-Fi and Harvey Norman could fall by as much as 23% and 19% respectively.
- “Safe” Markets First: Whilst Amazon’s entrance to the grocery space is seemingly inevitable, experts predict they will go after “safer” markets like electronics, toys, fashion and office supplies first.
- Executive Warning: Richard Goyder, the outgoing CEO of Wesfarmers’, is quoted as saying that Amazon would “eat all our breakfasts, lunches and dinners” if retailers do not become more competitive.
- Partnership Opportunity: One opportunity could be for existing retailers, especially Coles and Woolworths, to explore partnerships that leverage their existing presence and Amazon’s distribution processes.
- Strong Forecasts: Forecasts estimate Amazon’s revenues to reach $3.5-4 billion, or 14 per cent of Australia’s online sales and 1.1 per cent of traditional retail.
5. Amazon In Australia: A Skeptic’s View
Why It’s Important: Not everyone agrees that Amazon can swoop in and disrupt Aussie retailers overnight. Commentators argue that Australians already have a huge range of retail options available to them and that our retail landscape is unique and challenging.
- Already Spoilt For Choice: Other experts aren’t so sure Amazon’s entrance will be so disruptive, reminding us that Australian consumers already have a flood of options to choose from in the online retail and grocery space.
- Supermarkets Evolving: Coles and Woolworths (and many others) have offered online grocery sales for many years now, with competitive features like free shipping and same-day delivery in some cases.
- Online vs. Offline: Commentators argue that it’s not a case of Amazon versus the old guard of Australian retailers, but rather offline buying habits versus online adoption.
- Breaking Old Habits: For Amazon to penetrate the market, they’ll need to offer price and shipping options that are attractive enough to overcome existing consumer loyalty, convenience and habit, which is easier said than done.
- Home-ground Advantage: Australia is a smaller, more dispersed market with a lower proportion of retail spending. This could give existing players a home-ground advantage and create unfamiliar challenges for Amazon.