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Amazon's slow threat to Australian retailers

Business

The arrival of e-commerce giant Amazon in Australia will not be a day of reckoning for local retailers but risks being the start of a sustained danger period for unprepared players, the country's biggest bank says.

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A Commonwealth Bank of Australia survey of more than 600 retailers shows that almost half do not think Amazon’s slated September launch will effect their business.

The bank’s national manager of retail, Jerry Macey, says the widespread lack of concern stems from the fact that no one knows exactly how Amazon will operate in Australia.

“You don’t really know what Amazon is going to land … Are they going to land an AmazonFresh (grocery delivery service), are they landing the Amazon experience that you can normally get?”  Macey said.

He said most retailers would not be able to compete with Amazon on pricing or delivery.

At the same time, the e-commerce giant’s arrival was unlikely to shake up the local market immediately, Macey said.

“People are talking … almost like there’s a big Amazon box about to land on Australian retail and then that’s it – and that isn’t the case,” he said.

“I don’t think they’ll land and disrupt from day one. That’s certainly not what they’ve done in the UK.

“It will land and establish itself and then move forward methodically.

“It still gives retailers time to respond.”

Of 608 companies surveyed for CBA’s latest Retail Insights Report, 49 per cent were unfazed by Amazon’s plans to enter the local market, 30 per cent saw it as a threat, and 11 per cent saw it as a significant threat.

Another 11 per cent saw opportunity, saying that Amazon could provide them with cheaper products for their own businesses.

Myer earlier this month said it was confident it could compete with Amazon because of the department store chain’s mix of online and bricks and mortar stores.

Woolworths last year announced it was setting up a special unit to deal with what it called the “Amazon threat”.

Macey said the retailers most at risk were those with a commoditised or undifferentiated offering.

A retailer simply selling Levi’s jeans bought from a wholesaler is “something which could easily be disrupted by Amazon”, he said.

“Whereas if you are a perfectly integrated retailer who has control over the production of your product, and the design of your clothing and then you deliver it generally through your own store, or your online store, then I think that’s a lot harder for Amazon to disrupt.”

– AAP

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