E-commerce giant Amazon has entered the Australian market, and looks set to disrupt the country’s £171bn retail sector.

Amazon, which operates in more than a dozen countries worldwide, has already established a distribution warehouse just outside Melbourne where four-fifths of Australia’s population live.

Before Amazon’s arrival, Australian consumers could buy products through Amazon’s US website.

Now, they’ll be able to benefit from the company’s local presence, which will mean cheaper shipping costs and quicker delivery times.

State-owned Australia Post confirmed today that it will be Amazon’s primary delivery partner.

Amazon’s Australia country manager, Rocco Braeuniger, said in a statement on the eve of the launch that the company hoped to “earn the trust” of Australian shoppers.

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By GlobalData

What Amazon’s entry means for Australia’s retail sector

Online shopping accounts for between 8 percent to 13 percent of total retail sales in Australia, a relatively small proportion.

Retailers have been slow to link their physical stores with websites and other distribution channels.

Poor access to high-speed broadband in parts of Australia has also hindered growth in the online shopping sector.

In the most recent State of the Internet survey, US internet firm Akami ranked Australia 50th in the world for internet speed.

Australia’s vast amount of land (it is the sixth largest country in the world) coupled with low population density makes the logistics of retail delivery pricey.

Brian Walker, chief executive of the Retail Doctor Group, said Australia was “not an easy country” for e-commerce businesses.

It’s geographically spread out [and] it’s relatively expensive for shipping and freight.

However, the the world’s 12th biggest economy’s e-commerce market is growing  — it is projected to be worth £17.9bn by 2022, up from about £11.4bn now, according to the research company IBISWorld.

Australia’s Retail Association (ARA) is optimistic that Amazon will help local retailers by providing them with the opportunity to sell on a popular platform.

The ARA’s director Russell Zimmerman said:

The majority of Australian retailers view Amazon’s platform as a supplementary channel to their current retail offering.

Amazon’s Marketplace has more than 300m active users.

Swanwick Sleep, an Australian company that sells sleep-aiding glasses, was one of the first merchants included in Amazon’s Australian offering.

Tristan Swanwick, the company’s co-founder said he was keen to partner with the e-commerce giant:

As soon as Amazon officially announced they were coming to Australia, we started sending emails and making phone calls. Our mother used her spare bedroom to store inventory for us.

She would go down to the post office, maybe two or three times a day, depending on demand, to send off orders to Australian customers. She’s one of the happiest people in Australia that Amazon is here — she gets her spare bedroom back.

However, some retailers remain concerned about how the US retailer will impact their business models.

After Amazon confirmed plans to enter the market in April, Australian electronics retailer JB Hi-Fi expanded its shipping offerings to include same-day delivery in certain regions.

Shares of traditional retailers including JB HiFi and department store operator Myer Holdings have dropped sharply since Amazon announced plans to operate in Australia.

Financial analysts from Citi said in a note to clients that Amazon will not threaten existing Australian retailers over the Christmas period:

We expect Amazon will not be disruptive to Australian retailers this Christmas.

How about Alexa?

Last week, Amazon also announced that Alexa, the company’s smart speaker, will be arriving in Australia and New Zealand in early 2018.

The Australian and New Zealand versions of Alexa will follow the same path as the company’s launches in other English-speaking countries. 

The AI technology will ensure that Alexa uses a regional pronunciation of words and has a good local knowledge.