Aussies, Get Ready for Amazon!

Australia is next on the list to get the Amazon treatment. The online giant has finally confirmed long-standing rumors that it will launch a full offering in the Australian market, although it has not specified when. In March and April 2017, the company was reportedly scouting for its first distribution center in the country, which could suggest a launch by mid-2018.

Fung Global Retail & Technology’s forthcoming Deep Dive report looks at Amazon Australia in detail. And in this week’s note, we wrap up some of our conclusions on the likely impact of the company’s entry into the Australian market.

How Big Could Amazon Australia Get?

We estimate that Amazon Australia could generate total merchandise sales of just over A$4 billion in 2021, rising to around A$10 billion in 2026. Our figures include sales by third-party marketplace sellers on Amazon. This would see Amazon enjoying an approximate 20% share of Australian Internet sales by 2026.

Amazon already generated total Australia and New Zealand sales of around A$1.9 billion in 2016 through its overseas sites, including non-Amazon-branded sites such as Book Depository. This gave it an Internet market share of more than 8% in the region, according to Euromonitor International.

What Are the Opportunities for Amazon?

First, we see an opportunity for Amazon to grow an Australian e-commerce market that is immature: last year, only about 7.6% of Australian retail sales were made online, versus 10.5% in the US and 14.7% in the UK, according to our analysis of data from National Australia Bank, the Australian Bureau of Statistics, Euromonitor and the UK Office for National Statistics. Second, we think Amazon can consolidate the highly fragmented Australian online channel: in 2016, the top 10 e-commerce retailers accounted for just 35% of Internet sales in Australia and New Zealand, versus 62% in the US and 66% in the UK, according to our analysis of Euromonitor data.

What Are the Threats to Rivals?

We see the following potential threats to incumbent retailers from Amazon:

  • Electronics tend to be among the first categories to migrate online, and we expect Amazon to use this category to build scale in its Australian business in the short term. This poses a threat to incumbent electronics specialist chains as well as to some competing Internet-only retailers.
  • Longer term, Amazon is likely to encourage higher rates of online shopping in categories such as apparel, beauty and food. This will increase competitive pressures for undifferentiated specialists, particularly those that focus on the kind of third-party brands that Amazon will likely sell.
  • With its unique selling points of choice and convenience, Amazon threatens to steal sales from those multicategory retailers that have built their businesses on similar competitive advantages, including department stores and other general-merchandise retailers.
  • Finally, Amazon poses a threat to margins, too. The retailer is expected to price aggressively, which will pressure incumbents to lower their own prices. Additionally, any accelerated migration of sales to the inherently less-profitable online channel will dent profits across the retail sector. Plus, there will be added pressure on competing retailers to subsidize shipping for online purchases, given Amazon’s free shipping options and Prime membership offering.

In short, Amazon’s impact on Australia’s retail sector is likely to be substantial, and incumbent retailers will need to be ready to face the challenges with competitive pricing, multichannel convenience and, most importantly, differentiation. Our full report on Amazon’s move into Australia will be published soon on

Other pieces you may find interesting include: Deep Dive: US Consumer Survey—Amazon Prime Members Love Shopping Offline Too, Deep Dive—US Consumer Survey: Amazon is Winning the Battle in the Toy SegmentDeep Dive: US Consumer Survey—Amazon Yet to Crack the Menswear Market

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