Amazon Australia will nearly triple in size this year alone, posing a serious threat to local retailers like JB Hi-Fi, analysts predict

The inside of Amazon’s fulfilment centre in Dandenong South.
  • Amazon Australia is tipped to have an enormous year as it aggressively expands its local footprint to over 360,000 square metres.
  • As a result, Morningstar analysts forecast Amazon will process almost $9 billion in sales by 2025, and make one in four online sales by 2030.
  • The enormous growth will most threaten local retailers like JB Hi-Fi, Harvey Norman and Kogan, all of which are already overvalued, the equities team says.
  • Visit Business Insider Australia’s homepage for more stories.

After a slow and steady start, the ecommerce giant is looks finally ready to explode into the Australian market.

First arriving in 2017, Amazon Australia is to take an enormous bite out of the rapidly-growing ecommerce space over the next 12 months, Morningstar’s equity research team have predicted in a new report on Monday.

“We expect the online retailer to nearly triple its local footprint in 2021, and continue to forecast Amazon securing a considerable chunk of Australian retailing turnover,” director Johannes Faul and analysts Dan Romanoff and Preston Caldwell wrote.

“By 2030, we forecast Amazon to account for about 25% of Australian online retail sales, or 5% of the total Australian retail market.”

The US-company has been quietly laying the groundwork, opening fulfilment centres in Melbourne, Sydney, and Perth in the last few years. Now it’s got designs on a much larger future in Australia, building a Brisbane facility in addition to two more Melbourne and Sydney sites.

The new $500 million robotised Sydney centre, when finished at the end of the year, will cover an area equivalent to 24 football fields. Its completion will bring Amazon’s total physical footprint to more than 360,000 square metres.

Such explosive growth would see the $US1.54 trillion company suddenly start tightening the screws on Australian retailers. Morningstar says JB Hi-Fi, Harvey Norman, and Kogan should be particularly worried in that respect.

“Massive shifts in consumer spending to goods from services while restrictions last, combined with unsustainable
government wage subsidies have temporarily boosted discretionary retail sales in consumer electronics. However, JB Hi-Fi, Harvey Norman, and Kogan share prices imply a continuation of elevated sales, rather than the return to long-term trend,” the team wrote.

“[Meanwhile] we expect Amazon to continue growing faster than the competition in the medium term, driving consolidation in the consumer electronics market and hindering JB Hi-Fi and Harvey Norman from sustainably increasing their market shares.”

Typically taking seven years to hit its stride in a new market, Amazon is expected to pick up the pace as Australia’s $35 billion ecommerce market swells. The pandemic has only helped accelerate the retail transition, pushing Australia closer to the level of online penetration seen in other like nations.

Amazon is expected to take a disproportionate share of this future growth. Considering its new warehouses, Morningstar estimates Amazon will record nearly $9 billion in sales in 2025, or roughly the equivalent of one in four sales today.

While its eventual dominance of the local market is almost considered inevitable, one former exec says it is up to Australian retailers to take the fight to Amazon now before it’s too late.

The clock is ticking.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.