Retailers across Australia have been anticipating the arrival of e commerce giant Amazon for several months. It now seems apparent that they will be launching as early as October, giving them time to exploit the pre-Christmas sales boom.
That’s the view according to new statistics and analysis from investment bank Citi in a recent note to clients that also reveals that Amazon has also placed its first orders with Australian suppliers.
Amazon Australian Launch Expected In October 2017
“We would expect a formal launch to occur sometime in October 2017, ahead of Black Friday on 24 November,” Bryan Raymond and the Citi analysts said, before adding that Amazon is likely to push hard on price, so raising the possibility of a pre-Christmas price war.
“Amazon is likely to maintain a strategy of matching or being the lowest price in the market at all times. 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. In our view, lower pricing will likely be the result of Amazon’s lower margin and ROI expectations, particularly in the short term. A lower cost-to-serve could provide support for favourable buying terms relative to bricks and mortar retailers.
“This increases near-term gross margin risks for retailers as price will be Amazon’s key lever. Amazon will not have a meaningful advantage in two of their three key pillars in the short term (range and delivery, which will evolve over time). As a result, we expect prices to be competitive in order to drive volume.
“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,” it 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.”
Gift Market Initial Target
If Amazon does launch in October, it should come as no real surprise to retailers, as Amazon has been building its presence in Australia since April. July saw it start hiring for a huge fulfilment centre that is located on the outskirts of Melbourne in the Dandenong district. The gift market is likely to be its initial target in Australia, with the food, alcohol, furniture, auto and hardware retail sectors to be first to feel Amazon’s impact. Next will be the electronics, department stores, clothing, leisure and footwear stores according to Citi, the earnings impact being greater than market share loss.
Amazon have as yet to comment on when the exact date the launch of their operations in Australia will be,