- Morgan Stanley analyst Tom Kierath thinks Amazon is struggling to beat local retailers on price in Australia.
- The ecommerce giant is competitive when it stocks the item in one of its Australian warehouses, but it often has to ship items in from the US.
- Retailers in Australia have also been relatively reluctant to sell their products on Amazon, according to Kierath.
There’s no shortage of doom and gloom in Australia’s retailing sector right now, but one mercy is that Amazon’s local launch has been more pussycat than tiger – at least so far.
New data crunched by Morgan Stanley analyst Tom Kierath suggests that Amazon is struggling to beat retailers JB Hi-Fi and Rebel (owned by Super Retail Group) on price, with the internet giant’s limited range of locally warehoused products forcing it to rely on third-party shipping from the US.
Across 16 products Morgan Stanley price checked between Rebel and Amazon, the latter was on average 14 per cent more expensive.
For JB Hi-Fi, a sample of 12 products showed Amazon was cheaper on three, and JB on five; the rest were at price parity.
There was a difference, however, on prices that Amazon ships from its own Australian warehouse (these are known as first-party products).
In those sportswear products Morgan Stanley tracked, Amazon’s first-party items were 13 per cent cheaper than Rebel. Similarly, Amazon was 4 per cent cheaper on the first-party items sold by JB Hi-Fi.
What this tells us is that where Amazon ships a product from its local warehouse, it’s very competitive, and often cheaper, than local retailers.
But it appears there are not enough items being shipped locally for existing Australian retailers to feel too much pain.
While the number of products eligible for Amazon’s Prime shipping offer has increased 56 per cent since August 2018 on Morgan Stanley’s data, the majority of these are being shipped from the US, which means delivery is up to 13 days, and orders must be over $49.
That’s hardly very attractive compared to the quick delivery times offered by the likes of JB, which can also offer products via its click and collect service with lead times of just one hour.
Retailers resist Amazon platform
Amazon’s lack of Australian warehouse space is clearly an inhibitor. But Kierath also points to a potential reluctance of Australian retailers to sell via the Amazon platform.
“Suppliers will have learnt from international experience, in our view, and may seek to avoid Amazon dominating sales of their products.
“By selling to Amazon, brands give the company access to the sales data of their products. Amazon can quickly identify top sellers, examine why customers like the product by mining customer reviews, manufacture its own private label version of that item, undercut on price, and then place it at the top of the search results.”
The structure of Australia’s retail sector – where categories tend to be dominated by a smaller number of players – might also give local retailers a bit more reason to resist jumping on the Amazon platform.
In the US consumer electronics game, for example, the top three retailers have 36 per cent of the market, while JB Hi-Fi and Harvey Norman have 53 per cent. In sporting goods, the top three retailers in the US have 20 per cent combined share, while Rebel has a 21 per cent share in Australia on its own.
That’s not to say Amazon won’t get bigger and better over time. In groceries, for example, it appears to be expanding rapidly, and the average price gap between it and Coles and Woolworths has almost doubled in 12 months, to around 13 per cent.
But the giant is taking time to find its feet.
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