Amazon invests an extra $1.6bn in Australian network as new report reveals online shopping has saved households almost $3500

Amazon is ramping up investment in Australia as a new report reveals inflation would have been higher without competition from online retailers.

Amazon Australia country manager Janet Menzies, says Australian households have saved almost $3500 on average in the past five years via online shopping, which has shaved off the equivalent of 0.7 percentage points from inflation.

Amazon is spending $1.6bn in building five new Australian operation sites – including warehouses and delivery centres – as a new report reveals households are saving thousands of dollars shopping online.

The new centres will be completed by the end of next year and employ 4500 people once fully operational. 2000 of those jobs will be at a robotics fulfilment centre in Melbourne which will be about the size of 11 MCGs, eclipsing Amazon’s facility in Western Sydney.

Overall, the tech behemoth has invested $15bn in its Australian operations since 2011. It has been focused on speeding up deliveries for its customers in past months. This includes expanding its free next day deliveries to Brisbane and key regional cities for Prime customers and recruiting a fleet of contractors as part of its Delivery Service Partner program.

“Despite the fact that we know we have a long way to go. We actually feel pretty good about where we are now,” Amazon country manager Janet Menzies said.

“We spent the last six years building the critical infrastructure that allows us to deliver on the customer mission that we feel so strongly.”

But the investment has come amid a cost of living crisis after the Reserve Bank hiked interest rates 13 times since May 2022. The latest national accounts figures showed economic growth slowed to a near standstill at the end of last year as soaring borrowing costs crushed consumption.

Ms Menzies said Amazon customers were “doing it tough”. “One of the questions I get often is ‘how has Amazon’s strategy changed given the cost of living pressures?’

“First of all, we’re super conscious of the cost of living pressures. We talk to customers all the time and they tell us that they’re doing it tough. They talk about things they’ve had to give up and the way they’re making different purchasing decisions. And, in fact, one of the things that has driven us worldwide is really to provide value right?

“So our focus very much is on delivering broad selection on having that fast free delivery. And then finally having competitive pricing and that’s through everyday pricing, but it’s also through (sale) events.”

Ms Menzies said Australian households have saved almost $3,500 on average since 2019 via online shopping, citing a study that Amazon commissioned from Mandala.

The report stated that without competition from online retailers, inflation would have been higher.

“We find that in the absence of competitive pressure from online channels, inflation would have peaked at 8.9 per cent in December 2022, 0.7 per cent points higher than the actual peak of 8.2 per cent.”

The report said the savings were equivalent to receiving three weeks’ worth of groceries for free each year since 2019. “The cost savings were largest for recreation and culture – items such as stationary, toys and pet food – where households have saved nearly $1000 in the past five years.”

But online shopping remains relatively immature in Australia, comprising about 10.7 per cent of retail sales last year. This compares with 26.5 per cent in the UK, according to Statista.

The Mandala report found that if online sales represented 20 per cent of the retail market, average household savings would have almost doubled to $6344.

“That’s a pretty massive finding that we probably don’t talk enough about (and) that is something that encourages us,” Ms Menzies said.

Amazon Australia general manager Matthew Benham said the company was not just focused on speed but also building capacity.

“We need to be able to have the ability to grow the selection, as we have done over the last six years to now have over 200 million products available on site, but we’re not going to stop there.

‘If you look globally now, over 60 per cent of Amazon’s sales are through third party sellers. If you bring that closer to home here in Australia, we have over 14,000 Australian sellers that are serving across our stores.”

Amazon Australia’s General Manager of Delivery and Supply Chain, Anthony Perizzolo said the 4500 jobs that the five new operational centres will generate once completed will span the full spectrum of skills.

“There are going to be the unskilled roles that are going to have a lot of on the job training all the way to highly skilled tech heavy with robotics,” he said.