Amazon likely poses no short-term threat to local retailers: analysts

Amazon isn’t competitive enough to disrupt Australia’s retail industry in the short-term, but remains a danger, say analysts.

Pauline Frey, in Cairns, tries out the new Amazon online store. Pic: STEWART McLEAN

Amazon is unlikely to disrupt retailers in the short term because its offering isn’t competitive enough, according to analysis by investment bank Morgan Stanley.

Citibank also says the online giant poses no threat to Australian retailers before Christmas, but is set to be a force to be reckoned with once it expands here.

JP Morgan analysts, meanwhile, maintain their view of the danger Amazon poses to the Australian retail landscape following its local launch this week.

The analysis comes amid reports that Amazon’s threat in Australia appeared overblown, with claims of “patchy” offerings and a rise in local competitors’ share prices.

Morgan Stanley’s analysis showed electronic items listed on Amazon are around 13 per cent more expensive than existing retailers, while apparel and sporting goods are likely in line with locals. Dry groceries are on average 13 per cent cheaper on Amazon, compared with Coles and Woolworths.

“We note Amazon isn’t always uniformly cheaper than the competitors, but does go after certain categories, usually consumer electronics,” analysts Thomas Kierath and Monique Rooney said in their report.

“However, based on our analysis, it looks to be groceries.”

They said that while Amazon’s Australian website, which launched yesterday, would likely improve its offering over the coming years, the prospect of a pricing reset is low.

The analysis also found that the website had a weak range and its delivery times were not favourable compared to existing retailers. Stock availability was low on many of Amazon’s retailers, with many products noting “only 1 left in stock”.

“Marketplace retailers look to be trialling on Amazon without actually committing much stock,” the report said.

“We struggled to find market leading brands within the range.”

Compared with existing retailers, Amazon delivery was in many cases more expensive and slower. Guaranteed next day delivery on Amazon is $9.99, compared to JB Hi-Fi where same day delivery is also $9.99.

“We doubt that consumers will purchase on Amazon for the speed and/or cost of delivery,” the report said.

Citibank analysts took a different view on delivery, because Amazon’s free delivery threshold is only $49, lower than the $100 threshold offered by many existing retailers.

But despite the added delivery value and competitive prices in some categories, its analysts said Amazon’s range is too small to have a major impact on existing retailers in the lead-up to Christmas.

“Based on the current offer, we expect Amazon will not be disruptive to Australian retailers this Christmas,” they said.

JP Morgan analysts also said noted Amazon’s limited range and underwhelming delivery speeds, but said they maintained their view that Amazon is a threat to local retailers as the online marketplace improves.

“It is a large, customer-centric company that is expected to work to improve its offer,” JP Morgan analysts said.

“Despite a more muted launch than feared, we suggest Amazon remains a risk for Australian retailers.

“We expect this launch to moderate the near-term impact of Amazon’s entry on the Australian retail sector yet remain confident that risk to retailers is skewed to the downside.”