Amazon's arrival in Australia - is it just hype ?

mycuppa

Folks,
I had spent a soggy Anzac day on the computer and prepared an opinion piece for my next monthly newsletter on Amazon's arrival in Oz.

The media, as they love to do, have been beating this story into a frenzy since October last year.

Over the last few weeks we have seen averages of 4 - 7 articles per day - all with sensational headlines, poorly researched journalism, premises built on previous stories with backlinks......basically nothing to tell stories. Even the share price in Harvey Normal dropped 12% the day Amazon formally announced their plans.

Of course Amazon are going to be secret about what they are doing and the poor journalists have to resort to making up hypothetical scenarios to keep their readers eyeballs stuck to the screen.......mostly it's around focusing upon the damage and carnage inflicted on traditional retail heavyweights.

I think it's going to be a good thing. There will be some benefits and some casualties. The big thing that has gone unreported is the likelihood of building a better performing logistics operation to service residential freight - long overdue.

So what do you think is going to happen ?

vyapada

Well, as a comparison - ALDI has what, about 12% of the market... Amazon would already have much competition especially from Kogan... I think uptake and progress in market might be slow but the online GST issue might be a big deal depending on how that turns customers toward retail vs online shopping.

mycuppa

OK....I hear you......but I am struggling to understand how the application of GST would be a deterrent in a domestic market. Bear in mind, I'm assuming a large proportion of the inventory for Amazon Australia will be locally sourced - at least initially. There are distinct and complex challenges with cross-border order fulfillment. We have trialed this already in our own business and it's rather painful, even with FTA's in place. Amazon works on the principle that they will not act as an importer. That means the exporter needs to establish a point of import that clears the goods prior to being allowed to move into the FBA (fulfillment by Amazon) facilities. That's also the point at which any tariffs are collected and managed. In other words, it's not an Amazon problem, so the inventory they hold in their facilities already has the appropriate levies applied. I see the big gain is going to be a delivery service to customers that is both cheap and fast......disrupting the current landscape. I also think that the original manufacturer or creator of the product/service is going to return to a rightful position of greater control - which is a really good thing in the long term as dominant retailers have been destroying the creation and generation of "stuff" for too long. Amazon provides a platform for the original manufacturer to get their "wares" to a broader customer base without worrying about the 120 day payment terms, rebates and other ludicrous policies designed to transfer the majority of the reward and cash flow benefits to the retailer and less to the investor, creator and risk taker.

West Village

I think the take up of Amazon will be quite strong. I look at the Costco model which was rolled out and whilst essentially a bricks n mortar approach I feel people were attracted not only because of the promise of bulk pricing but also interest in a large American staple entering the Australian market with a similar fanfare to what Amazon is currently recieving. It was a wake up call for the industry and they have taken some market share. I feel the only thing preventing them taking more market share like Aldi is how fast they can expand. Are they looking to be part of amazons inventory  fulfilment as a one two punch to the Australian retail industry?  As a potential customer I'm excited. Im excited to see the big retailers shaken up a bit and forced to innovate and reinvent to stay relevant and win business. I feel there is to much complacency in the Australian market. The one area I worry about with the Amazon business model ( one which I love by the way and would invest in as an investor) is the future of jobs in the retail industry with this model taking over. Highly automated, use of robotics replacing labour ( this I feel is both good and bad) , improving logistics in this country, retail efficiency. This is the retail model of the future. It's already affecting traditional retail  in the U.S. With the amount of foreclosures and tradition shopfront stores closing up this year alone. Im intrigued to see how this could affect the coffee industry in Australia with regards to raw/roasted beans and products if they ever offer them here, I believe they do in the U.S. What sort of impact do you feel this will have for the likes of yourself Mycuppa? Are there opportunities there for you to be part of inventory fulfilment ?

askthecoffeeguy

i dont see kogan and costcos being competitors with amazon merely signs of a healthy economy with relative cash flow i still think ebay rules the market here in terms of online sales i think for amazon to be competitive they'll need to increase exposure to a wider range of consumer goods than that which is currently available and to compete on their own terms as opposed to offering an alternative to the big retailers here  Aldi has proven that consumers are willing to be price savvy when it comes to spending by disrupting the market and im guessing that this is what amazon will do too p

Brett H

Nothing to add here but bring it on!  Three weeks ago despite shopping locally I couldn't get the Tag Heuer model I wanted here easily.  Moreover the local dealer told me it was a 4 week wait.  Amazon US with priority shipping and customs... I ordered it From the Amazon retailer Thursday and received it Monday.  Aussie businesses can't compete because our postal service is inadequate!!  Forget the savings I'm happy to pay for convenience, service and local support/warranty but what was offered was just pathetic!