Amazon's arrival in Australia
Date Posted:7 May 2017
Our take on Amazon's arrival in Australia
Journalists love a fresh, meaty topic with potential to generate hysteria, divide the winners from losers and more importantly polarize opinion.
It was around October last year when the first wave of initial stories leaked "whispers" of Amazon scouting locations in readiness to launch in Australia. Nothing was official at that stage, but the scent of a story was all that was needed to build some momentum of hype.
It was of course accompanied by more whispers that a few other European-based global grocery giants were also running the ruler over Australia's retail landscape to compete against our supermarket triumvirate that apparently continue to enjoy world-class margins and profitability - although that trend of profitability is in decline.
This set the ball rolling in what is now an out-of-control juggernaut with articles published daily on what Amazon means to Australia.
What I find most interesting (and at the same time disappointing) is that many of these stories about Amazon's arrival in Australia are poorly researched, devoid of intelligent facts and figures and based upon a contrived premise all retail in Australia remains suspended in a fragile state. They even rollout references to recent brands that have failed to justify the story's premise.
It often starts with a sensational headline about how Amazon will destroy all competitors across all industries, our biggest retailers are running scared, building war-rooms and implying they are clueless as to how to defend their at-risk positions. Even the share price of Harvey Norman tanked by double digit percentages in a single day when the Amazon announcement became official.
Unfortunately, we live in an era of fake news....... the journalists actually don't know anything and they grasp at desperate headlines to fill copy. Amazon, like all successful entities are excellent in managing secrecy - even their global real estate partner Goodman won't divulge information.
We are positive about the arrival of Amazon in Australia - for a number of reasons.
The biggest win for Amazon's arrival in Australia will be changes in logistics.
It's been a long time coming - a general lack of investment by most freight providers, negative attitudes to consumer freight, sneaky and appalling surcharges whacked on merchants for residential deliveries - it's glaringly obvious that general freight companies dislike residential freight and we are looking forward to some significant disruption in this space.
Amazon will have an impact in the lowering of prices for many goods in Australia whilst at the same time likely to result in opening up more imports into Australia.
Whether that is a good thing for the Australia economy is hard to understand - increased imports and the impact upon trade balances with a declining resources sector, etc. only the economists can predict.
It must be remembered that having Amazon in Australia does not automatically mean Australian merchants will be able to increase exports as each country has it's own entry requirements - just because you might list on Amazon Australia does not make it easy to fulfil orders outside of Australia, etc. So Amazon is not going to create global markets for Australian retailers, but it will generate thought and interest in considering the opportunities outside of Australia. Case in point, Aldi Australia are building an Australian-themed online presence in targeted Asian countries now.
I'm also hopeful Amazon will disrupt the outdated and expensive dinosaur that is eBay. eBay does little for it's 10% valuation fees (that are ironically sent offshore instead of paying fair and reasonable Australian company taxes to fund our health, education and infrastructure).
It's also got the most arcane restrictions and policies that do little to help businesses grow sustainably. They slant the bias of Best Match searches towards unsustainable metrics and the ability to configure flexibility in product and shipping configurations is outdated. I'm hopeful that true competition might change the game and force incumbent platforms to offer more for less.
I believe Amazon will hold the most opportunity for original manufacturers and "creators". These are the people and companies that have worked the hardest, invested the most to build their own capability and offer products that have distinction in the market, rather than just resellers.
Giving the original manufacturer more control via a broader platform with improved logistics performance means these original investors can operate without the controlling influences of dominant and predatory retailers like the big supermarkets.