The Amazon juggernaut is coming to Australia.
The company founded by Jeff Bezos today confirmed its intentions to pursue the retail dollar in Australia in a big way.
The US online retail giant is actively looking for a warehouse to become a fulfillment centre, the first of many in Australia, with floor space of up to 93,000 square metres, or about five MCGs.
A decision hasn’t been made on a location but it is likely in either Brisbane, Sydney or Melbourne.
Amazon will also start hiring to add hundreds more to the 1000 employees already in Australia. Among them will be a country manager to oversee the development of the Australian market over many years.
The long-anticipated announcement about Australia came in the form of a brief written statement.
“Amazon Web Services launched an Australian region in 2012, we launched a Kindle store on amazon.com.au in 2013 and we now have almost 1000 employees in the country,” Amazon said.
“The next step is to bring a retail offering to Australia, and we are making those plans now.”
The statement from Amazon emphasised the long term investment coming and the job opportunities flowing from that.
“We are excited to bring thousands of new jobs to Australia, millions of dollars in additional investment, and to empower small Australian businesses through Amazon Marketplace.
“We are optimistic that by focusing on the things we believe customers value most — low prices, vast selection, and fast delivery — over time we’ll earn the business of Australian customers.”
Based on its track record in other countries, Amazon will spend hundreds of millions of dollars over the next few years to establish its services in Australia.
No timetable has been released but Amazon’s assault on local retailing will be on a platform of “low prices, vast selection, and fast delivery”. The concept of one-hour delivery through Amazon Prime Now will be in Australia one day soon.
There has been previous speculation that Amazon will start rolling out its services in September. Business Insider understands some of the retail offering could come online sooner, by July.
The impact on the bigger retailers such as Myer, JB Hi-Fi and Harvey Norman, and the industry in general, will be large. 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.
Amazon, dubbed the “Country Killer” by analysts at Morgan Stanley, reportedly told Watermark Funds Investment chief investment officer Justin Braitling: “We are going to destroy the retail environment in Australia.”
The online retailer’s effort is relentless in the countries it decides to take on. Amazon now sells more non-food goods in Germany and the UK than any other retailer. Morgan Stanley estimates that Amazon accounted for around a third of the growth in all retail sales (off-line and on-line) in Germany and the UK in 2016.
While the official statement was light on detail, much can be gleaned about Amazon’s approach from its actions in other countries.
Amazon launched in Spain about five years ago, investing about $A700 million, including a head office, fulfillment centers and a tech hub for research. It now has 1000 employees and will be hiring another 600 this year. Customers in Spain have access to 175 million products and the Prime Now service which offers delivery within one hour.
Amazon already does $1 billion in sales in Australia by shipping from overseas, according to analysis by Morgan Stanley.
But that’s small compared to the whole pie. Total annual retail sales in Australia is $300 billion.
Bunnings has $11.5 billion in revenue, JB Hi-Fi $3.9 billion and Harvey Norman $1.8 billion. All three sell goods with a long shelf life, the type of products now in Amazon’s sights in Australia.
In Australia, Amazon is already selling entertainment, including ebooks and Amazon Prime streaming of television series and movies.
The next stage is local ordering and local delivery of goods from and within Australia.
The initial focus for Australia will be consumer and home electronics — the market currently dominated by JB Hi-Fi and Harvey Norman — the type of goods which can be held without spoilage and can easily be shifted to a consumer in a box.
Part of that offering will be Amazon Prime membership with priority shipping coverage for any purchase for 12 months. In the US, this costs $US99 a year and GB79 in the UK. A price hasn’t been worked out for Australia yet.
Amazon Marketplace, where small players can sell their wares on Amazon, will also be a focus in Australia. Some Australian businesses are already use this via the US to gain reach to international markets.
Fresh food, and perhaps physical stores, would be some years in the future. It took 12 years, from Amazon’s startup in the UK, for fresh food deliveries. Amazon Fresh is only available in the US and UK. Fresh would mean Amazon competing with supermarket giants Woolworths and Coles. Business Insider revealed in January that the company was hiring people to work on the product locally.
For Australia, in the short term, Amazon will be deliverying a range of dry goods, or non-perishables, such as canned food and other household necessities such as tissues.
The potential for Amazon is enormous with online retail sales hitting $21 billion in Australia last year and growing at 14.2%.
And most (56%) Australian adults told Nielsen in February they will buy from Amazon when it lands.