Retailers brace as Amazon launches in Australia

Sydney: US Internet giant Amazon launched in Australia in time for Christmas, with retailers scrambling to cut costs and boost their online offerings as they brace for an expected shake-up of the sector.

The arrival yesterday of the behemoth – which has grown from an online bookstore to one of the world’s largest firms – poses a threat to a market already grappling with weak consumer confidence amid tepid wages growth.

The American giant is offering “millions” of products from wellknown Australian brands, as well as small and medium-sized Australian businesses selling on Amazon Marketplace.

They will be shipped from a warehouse in Melbourne.

Online shopping only accounts for between 8-13% of total sales in Australia, leaving room for growth in a sector estimated to be worth more than A$300bil (RM927bil) annually.

“We believe Amazon’s full entry into Australia will likely be a success,” UBS analysts said in a note ahead of the launch, adding that Australia was an “attractive market where online is under-penetrated”.

“Australian online shoppers spend the third-most globally of Amazon’s markets.”

Retail categories most likely to be hurt by Amazon’s entry include electrical, appliances, apparel and cosmetics, UBS added.

Amazon is likely to absorb losses initially to boost its market share, IBISWorld senior analyst Kim Do said, pressuring the profitability and margins of its competitors.

Some analysts warned Amazon would face challenges, such as low access to broadband and the large size of the island continent.

“A key reason why Australia lags behind its peers (in the development of the e-commerce sector) is the low access to broadband,” BMI Research, Fitch Group’s research arm, said in a note.