Amazon’s plans for Australia are bigger than first thought.
A retail executive who recently left Amazon — where he was responsible for internationally expanding its grocery operations — says the internet giant will be fully operational in Australia by the end of 2018.
Brittain Ladd, who until last month was Amazon Fresh and Pantry Operations worldwide expansion manager, told Fairfax Media that the company will “launch as many services and products as possible within Australia”, as it is an “attractive” market.
As well as offering the whole catalogue of products such as fresh food, takeaway food, electronics, fashion and, of course, books, the company’s popular Prime Now membership program will be launched locally, as well as grocery delivery scheme Amazon Fresh.
[Editor’s note: this article has been updated to reflect that Ladd has left Amazon and is not authorised to speak for the company.]
Ladd, a former Deloitte supply chain consultant, was non-committal on the prospect of physical outlets for Australia in the short term, telling Fairfax the company would “build physical grocery stores and launch Amazon Go only after Amazon has become more established in the country and analysis determines the market will support physical stores”.
Amazon is due to launch its first cashier-less, walk-in walk-out grocery store in Seattle at the end of this month but, according to the latest reports, the opening has been delayed due to technical issues with the payment technology.
During his time as a Deloitte consultant, Ladd pitched the concept of a “multi-format store” to Amazon — a smaller supermarket with dimensions similar to an Aldi outlet — that would only stock items that customers like to physically inspect, while the rest of the catalogue would not be stocked and directly delivered to homes on demand. A drive-through pick up option may also be a part of such a format.
“Australian consumers will embrace online grocery ordering and delivery from Amazon. And I believe Amazon’s retail store formats such as Amazon Fresh Pick Up or the multi-format store can be successful in Australia and south-east Asia,” he told Fairfax.
When contacted by Business Insider Australia, Ladd explained his comments were his own and not official Amazon policy. But his insights give a clearer picture from someone who has been inside Amazon on the Australian expansion plans for the company, although it still has not publicly confirmed its plans for the local market.
The web giant’s entry has been widely reported as a threat to the big retailers and supermarket chains, although one industry expert thought it could be a boon to smaller businesses.
“[Amazon] is the juggernaut that has been pushing eCommerce. People trust Amazon for pricing and fast fulfillment, and that’s a 300 million-person global market that Australian businesses will be able to reach,” the boss of inventory management software startup Cin7, Danny Ing, said last week.
Australians are certainly ready to shop on the platform, with 56% of Australian adults telling Nielsen last month they would buy from Amazon when it lands in Australia.
In November, an investment fund manager quoted an Amazon staffer as saying the company aimed to “destroy the retail environment in Australia” by undercutting local prices to the tune of 30%.
Then in January, Business Insider found that Amazon Australia is recruiting people to work specifically on its Amazon Fresh project, with software development roles in Brisbane advertised on its website.
With Amazon’s arrival looming, supermarket chain Woolworths revealed in February that it had outsourced its online shopping infrastructure into Microsoft data centres so that it could focus on user experience.
Coming in hot
Analysis by Credit Suisse shows Amazon will likely reach a better than 5% market share in many retail categories within five years of arriving in Australia.
Among ASX-listed retailers, Myer could be hit the hardest. Credit Suisse estimates the 117-year-old department store chain faces sales revenue falling by 4% to $3.16 billion in the 2022 financial year, compared with 2016, and EBIT falling 29% to $81 million.
The analysis by Credit Suisse shows Myer at the highest risk followed by Harvey Norman, JB Hi-Fi and Super Retail Group.
The most common responses to Amazon have been to reduce price, increase range, transact more business online and to reduce investment in stores.
But many of these strategies have not been particularly successful, says Credit Suisse.
“When quizzed, the common response from competitors of Amazon was that they felt that they had to defend what they had and worry about the profit implications later,” the analysts write.
“The main lesson that could be drawn for Australian retailers seems to be: be prepared with a defendable range, sustainable cost structure and sustainable allocation of capital.”
NOW READ: Australian retailers aren’t preparing for Amazon’s arrival and many don’t see it as a significant threat
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