Amazon to start as stream and become flood

Opinion: Behemoth’s much-awaited arrival might be an anti-climax, writes Tom Pullar-Strecker.

No, you didn’t miss it – Amazon Australia still hadn’t launched to the general public as of yesterday evening, despite a crescendo of expectation across the Tasman that it would launch last Friday, and then Saturday.

The company has built a ‘‘fulfilment’’ centre in South Melbourne and has been testing its ordering systems since Thursday with a closed group of triallists, who are likely employees of the company and its associates.

Amazon has said the launch is ‘‘imminent’’ however, and the latest speculation is that it will open its virtual doors to Australian shoppers later in the week.

Financial analysts and commentators have written screeds about the impact Amazon could have on the retail industry and other sectors of the economy on both sides of the Tasman.

But it is likely that in the short term, Amazon’s arrival may prove a bit of an anti-climax, as it will take time to ramp up its business. Amazon’s South Melbourne fulfilment centre – essentially a hitech warehouse from which goods are shipped direct to the public – is a former Bunnings distribution centre with a floor area of about 24,000 square metres, making it about the size of three rugby pitches.

For comparison, shipping company MWPVL estimates Amazon’s 19 fulfilment centres in Britain cover an area of almost a million square metres. In the US, Amazon has 116 fulfilment centres covering an area of almost 10 million square metres.

Amazon is not going to be able to stock enough products in its South Melbourne facility to fill every Australian and New Zealand Christmas stocking with every consumer good known to mankind – if it does ship any products for delivery to New Zealand from there from ‘‘day one’’ at all.

Long resupply lines to Melbourne will exacerbate any teething problems Amazon has anticipating demand and managing its inventory.

It seems likely that Amazon would have liked to have set up shop in Australia further in advance of the Christmas shopping season, and the fact its virtual doors were still closed on Black Friday is a reminder that the company is not completely infallible.

The company’s secrecy and a fearful domestic retail sector are likely to mean it can expect to be punished very publicly for any early disappointments or slip-ups.

But it is safe to assume the

It will be only a matter of time – perhaps a year or two – before Amazon's local arrival lives up to the hype.

Melbourne fulfilment centre will be only the first of several in Australia and New Zealand.

Amazon has the balance sheet to overcome any commercial obstacle, so it will be only a matter of time – perhaps a year or two – before its local arrival lives up to the hype.

Citigroup Australia analyst Craig Woolford forecast last year that Amazon could take an A$4 billion (NZ$5.2b) annual bite out of the Australian retail market within five years, securing about 14 per cent of all online sales in the country.

He forecast the biggest impact would be on retailers JB Hi-Fi and Harvey Norman which could see their sales drop more than 19 per cent.

Local broker Forsyth Barr forecast earlier this year that if Amazon chose not to establish a physical presence in New Zealand and instead shipped products to Kiwis from Australia, it could build up a business here with annual revenues of $122 million within five years.

If, on the other hand, it set up a fulfilment centre here and offered its two-day Amazon Prime shipping service with streaming rights to the All Blacks as a sweetener, it could take a $915m slice of the national economy.

A halfway house would be for Amazon to set up ‘‘a sorting centre’’ in New Zealand to handle orders that were serviced from Australia and perhaps only offer Amazon Prime to Aucklanders, leading to a business that Forsyth Barr estimated would have an estimated annual turnover in five years of $548m.

Amazon is known to be filming a documentary on the All Blacks, expected to screen on Amazon Prime next year, which probably contradicts any suggestion that the New Zealand market is too small for it to bother with.