Online shopping in Australia will double after Amazon launches

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Amazon’s long-awaited arrival on our shores will double the rate at which Australians are shopping online, according to new research into how the e-commerce giant will change the nation’s retail sector.

The online powerhouse appears set to start trading locally as soon as this week, telling third-party sellers to prepare to accept orders by 2pm Thursday afternoon.

Australia’s $300 billion retail sector has been on tenterhooks ahead of Amazon’s arrival, with fears the giant with its $US549 billion ($725 billion) market value would steal customers and drive down prices.

However new research by investment bank UBS suggests local businesses are well placed to capture market share as Amazon sparks a more rapid uptake of online shopping.

Only about 12 per cent of non-food retail spending in Australia is currently done online, which lags behind comparable markets. UBS analysts led by Ben Gilbert said on Wednesday they expected that figure to reach about 19 per cent by 2023.

Online sales have grown at 13 per cent over the past year, far outstripping total retail sales growth of 2.9 per cent, and Mr Gilbert said the rate of growth would double once Amazon starts trading.

This had happened within five years of entering each of the 11 markets where Amazon has set up shop in to date, he said.

A UBS survey of more than a thousand Australian consumers found that 42 per cent of respondents expected to shop more online after Amazon’s launch, while 56 per cent of shoppers would likely visit Amazon’s Australian website and 51 per cent said there was a strong likelihood they would buy on the platform.

“The common outcome from Amazon’s full entry is a more educated and empowered customer, via increased price transparency and service expectation,” Mr Gilbert said.

Price was the biggest factor driving shoppers’ online spending (55 per cent), followed by superior delivery services, and a large product range.

“Interestingly, the three key drivers of consumer shopping intensity … also coincide with the three pillars underpinning Amazon’s business model,” said Mr Gilbert, who expected Amazon to be successful in Australia.

Electrical items and appliances attracted the most interest from potential Amazon shoppers, followed by apparel and shoes, and cosmetics.

UBS said these products would make up more than 60 per cent of Amazon Australia’s sales by 2023, presenting a serious challenge to department stores and electronics retailers.

Mr Gilbert said local retailers could grow their online sales as more shop digitally, and that local traders had in fact won market share back from international competitors (up from 73 per cent of all sales in 2012 to 80 per cent this year).

But these sales would come at the cost of profits, however, because retails had to cut prices, improve services, and build infrastructure to deliver orders to compete online, he said.

Amazon confirmed early this year it intended to open a full retail offering in Australia, but the exact launch date has been kept tightly under wraps. But an email sent to third-party retailers and leaked to the website LifeHacker shows Amazon telling them to prepare to take orders from Thursday afternoon.

“To prepare for the launch of the Amazon Marketplace in Australia we will start an internal testing phase with a small number of customers,” the email says.

Retail watchers had for some months predicted Amazon would launch before this week’s “Black Friday” shopping event, which in the United States marks the start of the Christmas sales rush.

Meanwhile retail consultant Scott Kilmartin has said his ice-cream truck business was contacted about a marketing event for an “online retail store” with orange colour scheme (the colour of Amazon’s logo) on Friday.

Amazon’s local boss Rocco Braeuniger last week told a sellers’ conference that it would launch with both its third-party marketplace platform, as well as its own retail offer of potentially thousands of everyday products.

This article was originally published by the Sydney Morning Herald’s Business Day. Read the original here, or follow Business Day on Facebook.

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