The Australian retailers most at risk from Amazon

Kong: Skull Island © 2017 Warner Bros. Entertainment Inc. via IMDb

The immediate impact on Australia’s retailers from Amazon’s push into Australia may have been overstated, according to analysis by UBS.

UBS has just finished its latest Evidence Lab on Australian Online Retail which includes a consumer survey of 1,008 Australian shoppers, talks with industry players and global case studies.

The study suggests those who sell electronics, apparel and cosmetics are most under threat.

The US online giant is widely tipped to soon be trading goods via its Australian website, with both its own offering and that of third party sellers via its Amazon Marketplace.

There are reports that Amazon will be giving out free ice cream on Thursday to promote its Australian launch

Amazon’s Marketplace team sent an email to sellers on Tuesday afternoon saying testing will start Thursday, signing off: “Let’s make history!

The Australian Amazon website started showing everyday items from the company’s in-house label AmazonBasics over the weekend.

AmazonBasics item on Amazon Australia site. Screenshot/ Amazon

According to shoppers spoken to by UBS, the common outcome from Amazon’s full entry is a more educated and empowered customer via increased price transparency and service expectation.

“On the whole, we expect AMZN’s (Amazon’s) entry will likely be successful with interest for its Australian launch high,” says UBS.

“In our view, AMZN ticks most boxes for a successful launch in Australia albeit the impact will vary by sector.”

UBS says the ongoing shift to online will put pressure on established retailer margins given the need to invest in price, service and range to win in this less profitable channel.

“That said, we believe that on the whole the negative reaction from retail share prices has been over-done, with retailers with lower exposure, attractive valuation and a differentiated exposure to limit the impact,” UBS says in a note to clients.

Amazon will accelerate the rate of online penetration in the market with 42% of respondents in the UBS survey expecting to spend more online when it launches in Australia.

“We believe those retailers with exposure to high-margin generic categories, differentiation focused on range and exposure to categories consumers want to purchase on AMZN are most at risk, namely MYR (Myer) and TRS (the Reject Shop),” says UBS.

Those companies with the most upside to the acceleration to online are Super Retail, Harvey Norman and Solomon Lew’s Premier Investments, the operator of children’s stationery chain Smiggle, plus fashion labels Peter Alexander, Just Jeans and Portman.

The assumed margin impact by retailer in basis points:

Source: UBS


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