- Amazon has caused pain for a lot of companies with its disruptive business model.
- But now it could disrupt entire economies, especially in emerging markets, according to a research note published by a team of analysts at Morgan Stanley.
- Amazon could be up against thick competition in India, but it is also targeting expansion in several other countries.
- Watch Amazon trade in real time here.
Entire economies, particularly emerging markets, are at risk of sweeping disruption as Amazon looks to expand globally, according to Morgan Stanley.
But it is several countries whose retail sectors are at risk now. Those countries have not yet heavily adopted e-commerce, and when Amazon steps in, brick-and-mortar retail is in for a rude awakening.
“We see Amazon investing in new international markets to continue expanding,” Morgan Stanley analyst Brian Nowak wrote. He says emerging markets are “the next $5 trillion battle ground.”
Here are the emerging markets in Amazon’s crosshairs:
E-commerce in India amounts to roughly 3% of its total retail sales, according to the latest estimates from eMarketer. By comparison, that number hit 10% in the US in 2017, according to Statista.
Amazon launched its core ecommerce platform, Amazon Marketplace, in India in 2013 and Amazon Prime in 2016. It has invested $5 billion in the country, which included the opening of more than 60 fulfillment centers, Morgan Stanley said.
Still, it’s important to note the heavy competition Amazon faces in India as Walmart just bought Flipkart, the fastest growing e-commerce business in the country. Flipkart’s e-commerce market share in India is roughly 40% and rising, while Amazon’s share in the country has been slipping in the past few years, according to 7Park Data.
In the event Amazon is successful in India, Future Retail, a traditional retailer in India, could be seriously disrupted, the Morgan Stanley note said.
Indonesia and Thailand
Indonesia’s e-commerce sales were just 1.4% of total retail in 2015, according to eMarketer. But there is the “possibility that Amazon has been looking to invest ~$600mn in Indonesia,” Nowak said.
Amazon could be a serious threat to traditional Indonesian retailer MAP, as well as Indonesian department store Matahari, Morgan Stanley estimated.
E-commerce sales in Thailand were 1.3% of total retail sales. Amazon just launched the International Shopping Experience app in second-quarter 2018, Nowak wrote. The app is part of the Amazon Shopping App, and it allows consumers in various countries to narrow their product searches down to 45 million products in only their country.
eMarketer estimates Brazil’s e-commerce sales were roughly 3% or 4% of total retail sales in 2016. Amazon just opened up a 4,650 square metre fulfillment centre in Sao Paulo, which is four-times its prior footprint, according to Morgan Stanley. That will allow Amazon to manage and distribute its inventory to consumers in the country.
Amazon also launched Amazon Rechargeable, a debit card in Mexico in first-quarter 2018. Not only would this card make it easier for Mexican consumers to make purchases, but it could also give Amazon critical data on what those consumers want. Amazon leverages that type of data for both its advertising and e-commerce business.
Latin American department store Falabella and apparel sellers NetShoes and Renners could be in trouble. Additionally, appliance companies like Viavarejo and Elektra are also in the danger zone, Morgan Stanley said.
Australia’s latest numbers on e-commerce are from 2014, but are expected by eMarketer to hit only 5.6% by 2018, still a far cry from the US.
Amazon could change that too, recently launching Amazon Marketplace and Prime in 2017. And it’s not finished with Australia.
Amazon just launched a fulfillment centre in Melbourne this year, and followed it up soon after by announcing another in Sydney.
It has also partnered with government-owned Australia Post, which brought in roughly $5 billion in revenue in 2017, for last-mile delivery. The fulfillment centres will make the distribution process organised and efficient. The Australia Post partnership could add tremendous distribution volume and capabilities for Amazon.
Australian department stores David Jones, Myer and BigW could could get hit hard, according to Morgan Stanley. Specialty retailers Supercheap Auto and Harvey Norman could also be hurt.
Perhaps the most developed country in terms of retail on Amazon’s target ilist is Japan, which saw e-commerce total 6.7% of retail sales in 2015, according to Statista.
But Amazon wants to squeeze some more value out of that market. It launched Echo and Alexa in Japan in the third-quarter 2017. It also launched Prime Now in Japan, the Morgan Stanley note said.
Echo and Alexa are artificial intelligence devices that can make it easier for consumers to order products. Prime, of course, is an attractive discount marketplace consumers everywhere love.
Japanese merchandise and food sellers such as Rakuten, Oisix, and Lohaco are at particular risk, Morgan Stanley said.
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