Amazon plans to ‘decimate’ Australian retailers

AMAZON plans to “decimate” its retail competition when it launches in Australia, according to a fund manager briefed by the US e-commerce titan.

The Amazon Fulfilment Centre in Hemel Hempstead, England. Photo: Jeff Spicer/Getty Images

AMAZON plans to “decimate” its retail competition when it launches in Australia, according to a fund manager briefed by the US e-commerce titan.

Watermark Funds Management analyst Josh Ross says the $500 billion online retailer is gearing up to launch in Australia in little more than a year and will offer general merchandise and fresh food.

Mr Ross was last week provided with a special briefing covering Amazon’s plans for Australia by a senior consultant helping rolling out its local strategy.

“He was saying they are going to decimate a lot of the local retailers,” Mr Ross told Business Daily.

“They (Amazon) made the observation that prices here are high. The (profit) margins here are higher than other markets. And they pointed out their motto: your margin is my opportunity.”

Australians can already buy goods from Amazon but the world’s biggest online retailer has not established a physical presence in the nation outside of its cloud computing services division.

That was about to change, with Amazon scoping out sites for distribution centres and packing warehouses across the nation’s major capital cities, Mr Ross said.

It would operate in Australia under its Prime, Prime Now and Prime Fresh brands and was aiming to go live late next year or early 2018, he said.

Mr Ross said before going live, Amazon would carry out a far-reaching local price audit and was planning to offer discounts of up to 30 per cent to Amazon Prime members on a wide range of goods.

Categories Amazon is expected to compete hardest on are electronics and baby products.

Dollars & Sense by Macca.

This points to headaches for retailers such as JB Hi-Fi, Harvey Norman, Kogan, Big W, Target and Kmart.

Fresh food will also be part of the assault, posing a direct threat to Coles, Woolworths and Aldi.

Mr Ross said too many local retailers were underestimating just how seriously Amazon was taking the Australian market and the impact it would have on the incumbents’ profits.

“I don’t think they are ready but then again I don’t know how you can be ready.”

Mr Ross said while retail stocks in the US and UK had been repriced by investors to acknowledge the Amazon impact, that was yet to occur in Australia.

Wesfarmers chief Richard Goyder warned earlier this year that Amazon would “eat all our breakfasts, lunches and dinners” unless local retailers became more innovative and regulatory barriers such as limited trading hours were removed.

Australia’s online retail sales passed $20 billion for the first time in the year to June, according to the National Australia Bank. Amazon accounts for at least 15 per cent of all US online retail sales.