Which Sectors Have Most to Fear from Amazon in Australia?

Where ecommerce has already made inroads

Author: Rahul Chadha

October 2, 2017

The arrival of Amazon’s marketplace service in Australia is now all but assured. Now the question is, which retailers are likely to come under the most pressure in dealing with Amazon's disruptive force?

Amazon is preparing a new fulfillment center located outside of Melbourne and analysts expect the company to roll out its marketplace sometime this month. (Amazon already sells physical and digital books, Kindle ereaders and Fire tablets in Australia, and made its Prime Video streaming service available there last year.)

Amazon’s impending launch has generated nervousness among Australia’s retailers, who will soon have to deal with the ecommerce giant’s mastery of logistics, consumer targeting and deep price cuts to remain relevant.

But which retail sectors in particular might be most affected? New research from Sensis indicates some categories that may be more vulnerable, and some that may be insulated.

Sensis surveyed digital buyers in Australia in June, and found that travel purchases factor heavily into their online behavior. In fact, 57% of respondents said they bought airline tickets online, while 47% made hotel reservations—both areas where Amazon has yet to tread.

In addition, 47% said they had made takeout food purchases online, a service Amazon has slowly been rolling out to users of its Amazon Prime subscription service in select US cities over the past few years through the Amazon Restaurants brand.

On the flip side, 57% of respondents also said they’d made clothing and shoe purchases online sometime in the past year, a sign that physical retailers of those goods may soon be imperiled by Amazon’s launch Down Under.

Smaller proportions of respondents had purchased goods like music (41%), noncomputer electronics (30%) and cosmetics (22%). But even sellers of those categories are very likely be threatened by Amazon if it replicates its strategy of undercutting competitors on price while promising buyers fast shipping times.

According to some analysts, retailers in Australia remain unprepared for the significant ramp-up in competition that an entrance by Amazon represents. For example, analysts at Citi cut Australian furniture and electronics retail chain Harvey Norman’s profit forecast by 30% in anticipation of Amazon’s pending launch.

A recent consumer survey from the Commonwealth Bank of Australia found that almost 70% of respondents thought themselves likely to make a purchase from Amazon. Meanwhile, 78% of retailers polled by the bank admitted they didn’t have a strategy for combating Amazon in their home market.

eMarketer predicts that retail ecommerce sales in Australia will total $20.15 billion this year, accounting for 7.3% of all retail sales in the country. We project that sales will grow to $28.91 billion by 2021.