Myer, JB Hi-Fi, Harvey Norman and Big W were amongst those identified more at risk if Amazon should enter Australia this year, according to a study from Credit Suisse. The Good Guys however, were shown to have “below average risk.”
A scenario analysis by Credit Suisse has put forward its view that if Amazon enters the Australian market in 2017, Myer could lose as much as 55 percent of potential earnings before interest and tax by 2022, as opposed to if Amazon did not enter the market.
“Amazon forces businesses to change their business models, often to their detriment,” Credit Suisse analyst Grant Saligari told The Australian. “The lesson for Australian retailers is to be prepared with a defendable range, sustainable cost structure and sustainable allocation of capital.”
According to the report, Myer is in the red zone and the most at risk. Its risk assessment takes into consideration online purchasing factors linked with customer engagement and distribution barriers, with company-specific characters of price position, gross margin and cost of doing business.
Supercheap Auto, JB-Hi-Fi, Harvey Norman, Rebel and Amart Sports, Target, Kmart and Big W were all found to face medium risk. The Good Guys however were shown to have “below average risk”, mainly attributed to the bulky nature of its product, low gross margin and operating costs.
For Premier Investments, which owns Smiggle, the risk of Amazon potentially entering Australia would be mitigated by its expansion outside of Australia, however aside from its stationery brand, its other businesses fared high on the risk evaluation, including Peter Alexander, Just Jeans Portmans and Dotti.
“For retailers with strong sourcing capability and low distribution, access to Amazon’s distribution capability could be attractive,” Saligari told The Australian. “Conversely, retailers without access to globally competitive sourcing are likely to struggle, irrespective of existing distribution capability.”