Australian retailers are unprepared Amazon

ELI GREENBLAT
March 27, 2017
The Australian
US retail powerhouse Amazon is preparing for a potential launch of its food and groceries service AmazonFresh in Australia this year as it begins advertising for technical staff in Brisbane in a move that will send a shiver down the spines of local retailers.
It comes as research from Commonwealth Bank shows that only 14 per cent of Australian retailers have a plan to compete with Amazon, with only 11 per cent of retailers viewing Amazon as a significant threat.
“Many Australian retailers remain unprepared for Amazon’s arrival, or may be understating the potential impact that Amazon’s presence will have,’’ said Jerry Macey, national manager, retail, for CBA.
“This is somewhat concerning when you consider the impact Amazon has had on the US and other very mature retail markets.
“The reality is most retailers can’t effectively compete with Amazon on factors like delivery times and pricing, particularly when Amazon can sustain losses in the short term.”
Already laying the groundwork for its assault on Australia’s $300 billion retail sector by securing office space in Melbourne, kick-starting a launch to find distribution centres and securing trademarks around its services, Amazon has now upped its presence by seeking out key staff. AmazonFresh, the grocery delivery service that currently serves Seattle, Los Angeles, San Francisco, New York and London, is now looking for a software development manager based in Brisbane. If AmazonFresh is the first of a horde of services from the US retail giant to be offered in Australia it will pose a huge threat to supermarket chains Coles and Woolworths, as well as other players in the $90bn grocery sector.
AmazonFresh, which offers same-day delivery service of groceries, is believed to be aiming to be about 30 per cent cheaper than the supermarkets when it pushes the button on its Australian launch.
Amazon, whose founder and chief executive Jeff Bezos is famous for telling competitors “your margin is my opportunity’’, has emerged as a ruthless rival in the US with total sales of about $US100bn ($131bn) a year.
Such is its strength and reach that Amazon is estimated to have attracted more than 30 per cent of all online sales in the US during its “Cyber Weekend” extravaganza following Thanksgiving. According to recent US data, Amazon now accounts for about 50 per cent of all online retail sales growth in the US and 24 per cent of total retail sales growth.
Local analysts are warning of the carnage that will be wrought by Amazon if it expands into Australia.
Wesfarmers chief executive Richard Goyder, whose businesses include Coles, Officeworks and Kmart, has repeatedly warned the US giant will “eat all our breakfasts, lunches and dinners”.
Research from CBA shows that a majority of Australian retailers don’t have a plan to combat Amazon when it arrives on our shores, despite more than 70 per cent being aware it could enter the market as early as September.
Of those retailers surveyed by CBA, 41 per cent said they believed Amazon’s entry was a threat to their business, 11 per cent said it was an opportunity, while nearly half, 49 per cent, said Amazon would have no impact. Clothing and footwear retailers and those present in metropolitan areas were most likely to see Amazon as a threat, the CBA report said.