04.19.12

Amazon downunder

For the first time, the world’s largest online retailer is looking to set up a warehouse on Australian shores. In a move that is likely to make our local retailers tense, Amazon are looking to Asia-Pacific to extend their distribution network. However it is not yet known what this means for consumers purchasing from the retailer and in turn the impact it will have on the market. Faster delivery time is likely, but could it also mean cheaper products?

Pricing will all depend on how distribution is set up. Currently¬†Amazon does not have an Australian specific website for consumers unlike US, Canada, UK, Germany, France, Italy, Spain, Japan and China. If Amazon’s intentions are to set up a warehouse simply to distribute, then they are likely to avoid additional taxes, making product prices similar to what regular Amazon consumers are used to; essentially cheap in comparison to our local retailers. However if their intention is to set up a com.au version of the site, then consumers are likely to be lumped with taxes they’re not used to from the giant retailer. Consumers are already raising concerns about costs and product variety that will be available.

Amazon started in 1995 solely as an online bookstore, but quickly diversified its product offer to include electronics, music, software, clothing, furniture, food, personal care products, toys and jewellery. Starting out with a slow growth business plan which came under fire from many investors, the company didn’t make a profit until the end of 2001. They’ve come a long way from there, now attracting in excess of 615 million visitors annually and a $631 million net income last financial year.

Currently in Australia, online shopping equates to 10% of sales compared with almost 20% (and rising) in the US.

Amazon are expected to be considering warehouses in the realm of 40,000 square meters plus; similar to the space occupied by Coles and Woolworths.

Only time will tell what sort of an impact this will have on bricks and mortar retailers here in Australia. However the timing is right for retailers to get ready and really consider their point of difference. How can they add value in a market competing more and more so on price and the convenience of shopping online? If you’re thinking you need to evaluate your offer, positioning or marketing collateral, give us call. We’d love to chat about your potential.

Sandy Muir
Director of Brand Projects
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