Amazon to ‘destroy’ Aussie retail

AMAZON is planning to “destroy” Aussie retail when it lands in September next year with prices 30 per cent cheaper than local stores.

An Amazon Fulfilment Centre in the UK Picture: Jeff Spicer/Getty Images

AMAZON is planning to “destroy” Australian retail when it lands in September next year with prices 30 per cent cheaper than local stores, according to reports.

Speaking to The Australian Financial Review, Watermark Funds Management chief investment officer Justin Braitling said he had received a special briefing this week from Amazon about its Australian rollout.

Mr Braitling said Amazon’s plan was to collect pricepoints on everything before setting prices at a 30 per cent discount.

He said the e-commerce giant saw potential in Australia because prices here are too high, saying “your margin is our opportunity” would be Amazon’s “motto” for Australia.

“They [Amazon] will be dropping distribution centres and performance centres in every state next year,” Mr Braitling told the AFR. “They will be doing general merchandise and they will be doing fresh as well.

“They will also be putting physical stores on the ground which I don’t think anyone knows about. These will mainly be in regional areas because fulfilment is a lot harder in regional areas than in the cities.

“We spoke to the guy rolling out Amazon’s business here in Australia and in his words: ‘We are going to destroy the retail environment in Australia.’”

Mr Braitling told the AFR the launch had been pushed back for six months from March to September so the company could include its fresh food service.

“[The launch] has been deferred for six months — they were originally launching in the first quarter of next year. They have decided they want to do fresh at the same time as the general merchandising offer so that has put them back six months.

“They want to roll the whole thing out at the same time.”

Daniel Mueller, senior equities analyst with Forager Funds Management, told news.com.au the comments by the unnamed Amazon employee seemed to “read more as the bull case”.

“It makes a lot of good points, and certainly Amazon’s presence will definitely have a major economic impact on the Australian retail landscape, but in terms of Amazon being an online retailer you need a little bit of perspective,” he said.

Mr Mueller pointed out that online retail penetration as a proportion of total sales was around 7 to 9 per cent. “Even if they get half of the Australian market, you’re still looking at 4 to 5 per cent of total retail sales,” he said.

“And getting into fresh, it’s unclear how the model is going to work. But it does raise some good points. Australian retail margins are quite high, our supermarket retail margins are among the highest in the world.”

Mr Mueller said while overseas apparel retailers such as H&M, Zara, Topshop and Uniqlo had experienced some success in the past three years, in discretionary retailing Australia lacked a “big, well recognised brand that captures the consumer dollar just because of the brand”.

Amazon has been contacted for comment.