Amazon customer base growth to rival Myer, Kmart and Big W

Amazon’s logistics country lead Tim Coventry with Six Strings Brewery general manager Brent Adams and owner Chris Benson. Picture: Sue Graham

It’s taken six years, but Australia is about to experience an Amazon revolution in retailing and television.

A spectacular rise in the customer base of the online Amazon retail operation is a clear warning to non-food retailers around the country – adapt or suffer. And as I explained on Monday, free to air television is also threatened. Eventually, Amazon will extend its power to the food sector.

When Amazon launched in Australia in 2017 retailers were geared for a big challenge. But instead it was a fizzer and retailers did not take it seriously.

Amazon Australia’s general manager Mathew Benham.

Morgan Research reveals that in 2023-24 Amazon’s Australian customer base soared a stunning 16 per cent, or 1.1 million to 7.9 million Australians. It is now bigger than the combination of Myer and David Jones, larger than Target and very close to JB Hi-Fi.

There is still a reasonable gap between Amazon and both Big W and Kmart, but if Amazon keeps rising at the current pace, that gap will soon be bridged. And while most of the customer bases of Amazon’s rivals are skewed towards women, Amazon is divided equally between males and females.

To date, Australia’s big retailers have not responded radically to the duplication in Australia of Amazon’s overseas strategies. But the Amazon customer jump is an alert that they face similar challenges to newspapers and television.

We saw newspapers forced to dramatically change the nature of their operation in the last decade. Now free-to air television is under threat from a string of streaming services led by Amazon Prime. Retailers are next, and for some it will be an unpleasant experience.

Just over half the Amazon customer base is enrolled in Amazon Prime television streaming service. Amazon Prime viewers who take advertisements will get delivery discounts for goods supplied by Amazon to their home, plus and other benefits. It’s an incredibly powerful marketing tool not available to Amazon’s retail rivals

The Albanese government has swung in behind Amazon and legislated that anyone running a parcel delivery business where parcels are being sent to homes for consumption by individuals, then their transport operation is free of all the complexities and lower productivity transport measures contained in the 700-page industrial relations loopholes’ legislation.

Anthony Albanese on a visit to officially open The Shepherd Centre hearing loss clinic in the Western Sydney suburb of Oran Park. Picture: Max Mason-Hubers/NewsWire

Of course other online retailers can also benefit from the “Amazon clause” but the legislation will be a major blow to “bricks and mortar” retailers whose transport costs to bring goods to retail stores will rise by about 10 per cent because efficient independent family owned truckies are being legislated out and replaced by myriad of rules which effectively delivers a legal cartel between the unions and the larger transport companies.

And Australia Post, which serves many online retailers, is not organised to differentiate between deliveries to commercial enterprises and homes, so may find it difficult to benefit from the Amazon clause.

Of course, Amazon’s independent contractor system will still be subject to the unfair contracts legislation.

The Morgan research shows that on average, Amazon shoppers are purchasing six items a year on the platform. Kmart customers who shop at Kmart on average 7.5 times a year. Three in 10 Amazon shoppers make a purchase seven or more times over the year.

The Amazon business started in books, and books (including e-books and audiobooks) still represent around 31 per cent of purchases. But clothing has risen to 19 per cent and games and toys to 14 per cent.

What should alarm JB Hi-Fi is that, according to Morgan Research, the combination of computers, tablets, computer accessories, software, small electrical goods plus phones and accessories totals around 25 per cent of Amazon purchases.

Australian retailers could take advantage of some changes to compete with Amazon.

Encouraged by this penetration, Amazon has announced plans to move into the so-called “big box” retail – furniture and large electrical appliances. It is constructing a purpose built warehouse in Sydney, set to start in 2026.

This will intensify the attack on JB Hi-Fi and open up a frontal assault on Harvey Norman.

What differentiates Amazon from other online retailers competing with the “bricks and mortar” sector is Amazon Prime.

There is little doubt that streaming television has been the biggest force skyrocketing the Amazon retail customer base.

And if Amazon Prime achieves a major presence in sports television, then the 7.9 million customer base will explode. In due course, Amazon will consider going to the food business and areas that compete with Bunnings. Already 5 per cent of it sales are in pet food where Bunnings is also making a big thrust.

Australia’s retailers have always watched at streaming television as a foolish diversification, but the stunning rise in the Amazon customer base, delivered in part by Amazon Prime, will must cause them to at least watch at streaming television.

An Amazon Prime subscription gives customers free Amazon delivery, which is very enticing for many customers. Picture: Nicholas Eagar/NCA NewsWire

Most of the streaming services are international, but Australian retailers might consider a retail link up. Paramount, which controls the Ten Network, has made it clear that their global future is in streaming television. They could be interested in a deal. And of course the Nine network owns the Stan streaming service which now facing increasing competition from overseas majors.

I emphasise that I have no knowledge of any discussions, but that 16 per cent rise in the Amazon customer base will send the sword of fear through all Australian retailers as well as the television networks.