With Amazon Australia’s launch falling short of many consumer’s expectations, analysts forecast the e-commerce giant is unlikely to disrupt local retailers’ Christmas sales, however, the same could not be said for next year.
Citi analyst, Bryan Raymond, attributes the underwhelming consumer response to Amazon Australia’s initial product range and comparatively longer delivery times:
“Based on the current offer, we expect Amazon will not be disruptive to Australian retailers this Christmas”
“The range is patchy across and within categories. For example, over 40,000 toys and games are available from a large range of brands, while televisions are not yet available”
“Third party sellers are providing the bulk of the range, as is the case in other markets. Due to lack of distribution infrastructure, these third party sellers are currently undertaking fulfilment which lengthens the delivery speed”.
Analysts such as JP Morgan’s Shaun Cousins agrees that Amazon’s initial product range isn’t as diverse or cost-effective as retailers may have feared:
“While Amazon was not expected to be extraordinarily low on price, we had expected Amazon to make more of a ‘splash’ in its pricing at launch, yet that did not come through as strongly as expected”.
Following Amazon’s launch, rival retailer’s share initially spiked yesterday, before closing lower: Myer closed flat at 78 cents, JB Hi-Fi closed 1.5% lower at $25.35 and Harvey Norman dropped 2.1% to $4.16.
Concerning Christmas, some analysts predict that Amazon will bring in as much as $200 million in sales – a nominal amount compared to the $11 billion Australian consumers are expected to pour into Christmas shopping.
Overall, analysts such as Mr Cousins agree that many local retailers boast a more competitive price and delivery offering, affirming speculation that the e-commerce giant won’t significantly impede Christmas sales.
“Same-day delivery was not available on Amazon yet was available on JB Hi-Fi, Myer and Officeworks, among others, while JB Hi-Fi offers three-hour rush delivery”
“The range was somewhat modest, with key brands not available or only in limited breadth, with the source a mix of first party and third party”.
However, it’s not a complete sigh of relief for local retailers, with analysts from Bain & Co warning that Amazon Australia will rapidly build its offering over the next 12 – 24 months.
The e-commerce giant is said to currently be targeting a limited number of “hero SKUs”, causing its launch to feel “rushed and underwhelming”.
Bain & Co analysts predict that Amazon will become Australia’s 6th largest retailer in five years time – behind Woolworths, Bunnings and Coles – notching annual sales as high as $10 billion.
