Amazon Australia is stripping customers from rival platforms as sales boom
Amazon is now a major player in Australian retail, sporting a believed 10 per cent stake of all online shopping sales off the back of its Prime service.
Online retail giant Amazon has punched through the $3bn sales barrier in Australia, driven by a broad lift in demand for its retail and media services in 2023, led by the increasing popularity for its subscription service, Amazon Prime.
Amazon is now believed to account for 10 per cent of all money spent on online shopping in Australia.
Its sales in Australia have almost doubled in the past few years as it takes on established players, such as supermarket giants Woolworths and Coles, department stores like Kmart and Big W as well as other pureplay rivals, led by eBay and local online stores Kogan.com and Catch.
Amazon is easily outpacing the growth of the local online retail sector and is pinching market share from both local and international retailers.
It is believed Amazon now has just over 4.1m subscribers to its Amazon Prime service, easily eclipsing the subscription programs run by Woolworths and Wesfarmers which each have only around 400,000 to 600,000 members.
Woolworths and Coles will likely point to the growing reach and power of the US tech giant when their respective chief executives appear before the Senate inquiry into supermarket pricing and market power, which kicks off on Thursday.
In its submission to the Senate inquiry, Woolworths called out the intense competition from Amazon and the US retailer’s incursion into its traditional market, with Amazon offering around 6500 long-life grocery and everyday needs products.
The latest accounts for Amazon Commercial Services, the global corporation’s key business arm in Australia, underlines this growing market power in Australia with its total sales for the 2023 calendar year hitting $3.1bn, up from $2.63bn in 2022 and $1.75bn in 2021.
Latest analysis of the accounts by investment advisory firm MST Marquee argues Amazon’s market share gains in Australia are accelerating, with the online retailer recording $5.8bn in gross transaction value (GTV) for 2023, which would account for one in 10 of all online spending by Australians.
Amazon’s Australian accounts show its own online store grew revenue by 21 per cent in calendar 2023, while third party seller revenue increased by 79 per cent.
Some of the strongest growth came from what Amazon classes as its “subscription services,” such as its Amazon Prime platform which offers a range of products and services including free shipping as well as TV and movie streaming.
Launched in 2018, Amazon Prime has already seen a fivefold lift in its sales in Australia, helped by TV shows and movies such as The Rings of Power, The Marvelous Mrs. Maisel, Fleabag and The Boys. Amazon’s subscription services in Australia reaped sales of $346.2m in 2023, up from $246.21m in 2022.
MST Marquee analyst Craig Woolford said Amazon Australia could reach $10bn in GTV over the next three years as it strips customers from other platforms.
“Its market share gains have been mostly at the expense of other online retailers. Amazon is largely taking share from other online retailers. Catch had GTV fall 27 per cent and Kogan was down 14 per cent in 2023. eBay is likely to have dropped too,” Mr Woolford said.
He said Amazon is winning on subscription, matching on price, and building large base of subscribers which is proving highly valuable.
“In our view, one of the most understated advantages Amazon has is its subscriber base. Based on its subscription revenue, we estimate it has 4.1m Prime subscribers. Wesfarmers OnePass subscription programs are likely at 400,000-600,000 members. We estimate Woolworths has 400,000-500,000 on Everyday Extra and probably another 300,000-500,000 on Delivery Unlimited. Kogan has 466,000 on its Kogan First subscription.”
Amazon has also managed to improve its profitability in Australia as its sales boom, with the company posting a net loss of $8.84m for 2023, down from the loss of $32.74m in 2022.
In May 2023, Amazon Prime lifted its monthly and annual membership fees for Australian users of its popular online marketplace, entertainment and streaming services, mirroring recent price hikes by other streaming providers such as Netflix and Disney.
The price for its Amazon Prime package was hiked from $6.99 to $9.99 per month, while the annual membership will increase from $59 to $79.
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