Amazon’s full suite Australian website is expected to go live within the next 60 days, according to Citi analysts, with predictions of the most exposed local retailers.
On 4th August 2017 Amazon officially announced its first Australian distribution center would be located in Melbourne suburb Dandenong South, and, if feedback from its suppliers is anything to go on, Amazon could launch its full suite of services in Australian within the next 60 days.
According to Citi analysts, Amazon’s local website is expected to go live sometime next month, before Black Friday on 24th November, which is considered the commencement of the Christmas shopping season in the US, which is catching on fast in Australia.
The Citi analyst team, led by Bryan Raymond, released a note to its clients last Thursday saying that Amazon has already placed its first orders with suppliers in recent weeks, suggesting a pre-Christmas launch is likely.
“We would expect a formal launch to occur sometime in October 2017, ahead of Black Friday on 24 November,” said Raymond and his team.
The team believes that Amazon will likely offer free delivery for orders over a certain amount, as well as its loyalty membership service, Prime, which offers free video and music streaming, e-books, free shipping and other Amazon-specific deals and services in July next year, corresponding with Prime Day.
However, other analysts like Roger Montgomery of Montgomery Investment, say that Prime could be offered here as early as December this year. “Amazon and Amazon Prime will be arriving in Australia in December this year – they’ve brought forward their expected arrival by almost 12 months,” he told Bloomberg.
Prime has the potential to significantly disrupt the retail market as we know it and create a very shady outlook for the landscape, more so than it has been in the past few months according to Montgomery. “In the United States now 52% of households have an Amazon Prime account – if the same trend arises in Australia we’re going to find a lot of the volume growth that retailers require and a lot of the margin that they have been earning – will prove to be over earning.”
Citi analysts said that Amazon will undertake a price matching strategy, to maintain its offer of selling goods at the lowest market price at all times.
Amazon uses algorithms to price the same products that many of our retailers are selling, and is going to produce much more attractive offers to Australian customers.
“This could spark a response from incumbent retailers who are intent on not being beaten by Amazon on price during the key pre-Christmas sales event,” the note said.
“In our view, lower pricing will likely be the result of Amazon’s lower margin and ROI (return on investment) expectations, particularly in the short term. A lower cost-to-serve could provide support for favourable buying terms relative to bricks and mortar retailers.”
Citi note also shed light on Amazon Marketplace, which could be a “secondary focus” for the company here, although several eBay seller have already been targeted.
Raymond and his team also believe that Amazon will likely offer its full product range in Australia, but initially, it will focus on the gift category, given its limited logistics capabilities in the early stages of its setup here.
While Amazon has confirmed its Melbourne warehouse in Dandenong South, it still has not secured a Sydney fulfillment center as yet, which may see it seek third party warehouses there in the short term.
Morgan Stanley estimates current sales of Amazon in Australia to be approximately $1 billion through overseas shipment.
Raymond and his team believe that after the gift category, Amazon will focus on department stores, electronics, clothing and footwear in Australia, saying the earning capacity of competing retails will be impacted more than its market share loss. JB Hi-Fi, Harvey Norman, Myer, Super Retail Group and RCG are thought to be most exposed to the impact of lowered stock value, as a result.
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