There has been a flurry of online discussion in facebook groups and blogs over the last day or two about Amazon coming to Australia, thanks to this article in the AFR :
Amazon delays Australian Launch to September to include fresh goods (Select first article)
There are a number of quotes and claims in the article. The notable ones are:
They [Amazon] will be dropping distribution centres and performance centres in every state next year
Will discuss this below, but the DCs will be the key to getting a real presence up and running by September…
“It has been deferred for six months – they were originally launching in the first quarter of next year,” Braitling said.
“They have decided they want to do fresh at the same time as the general merchandising offer so that has put them back six months.
“They want to roll the whole thing out at the same time.”
“Merchandise” is the key term here. Up until now the only real news we have seen in the media is about grocery of ‘fresh’ produce.
The real volume and disruption to the local Australian retail and ecommerce market will come when Amazon eventually builds DCs and does general merchandise retail (it’s own stock, or 3rd party stock).
Recently they were reported to be looking to Distribution Centre sites (link)
So, can they really launch by September?
I spoke to a number of contacts overnight and have a few thoughts based on these informal discussions.
Amazon relies on its distribution centres and their automation and technology to provide their pricing and efficiency. To replicate what they are doing elsewhere, and bring the Prime program to Australia they would need to locate stock in DCs near our major population centres. This would require a DC on the West Coast (Perth) and a number of them on the East Coast.
As far as I know, and from what my ‘sources’ have told me, Amazon might well be looking for land to acquire to build DCs, but may not have actually purchased any yet.
They could shortcut the process by leasing space temporarily however.
Their DCs in the USA are huge, up to 1 million square feet in area (or around 90,000 m2).
I had originally thought the ‘dirt to distribution’ timeframe for an Amazon DC might be 12 – 15 months, putting the September 2017 launch target out of reach, but after speaking to a good contact in the USA it turns out that they are getting better at putting these facilities up and 6 – 9 months may be achievable. This would definitely put September 2017 in a valid timeframe for not only fresh goods, but also merchandise distribution.
So can it happen by Sep 2017?
Yes, believe it could.
What will this mean for local retailers?
Well, we have so far looked from a distance at the impact Amazon has had in the USA, and now in Europe and other emerging markets. Amazon is now responisble for about half of all online retail in the USA. An amazing statistic. And around 5% of US retail. Most consumers start searching for a product in Amazon, so they are attracting a huge audience, and growing quickly, which is quite a feat for a company of already significant size. (view their Q3 numbers as reported by ChannelAdvisor’s Scot Wingo here. They are really quite staggering)
As a retailer, you need to set up shop where the customers are. Amazon will attract a lot of customers. An estimated $500-700 million of Aussie online spending already goes to Amazon in the US (source), so I think a lot of customers will start to look at Amazon locally.
Should we be afraid, or excited about Amazon coming?
I think if you are a online pureplay you need to look at your model. Can you differentiate? Will Amazon be able to beat you on price (don’t be fooled, they will compete with you if there is a margin opportunity)? As a retailer, I think I would list on Amazon AU as soon as it was available. It will be a marketplace attracting buyers and I would want my stock listed there.
I would probably look at FBA when they offer it here as well if it made sense for some product. It may be a cheaper option than my own warehouse and distribution.
But for an ecommerce business to be successful in Australia there will be more pressure than ever to be efficient at what you do. Amazon may be part of your marketplace strategy, like eBay has been.
What will happen to eBay Australia?
No doubt eBay will be put under a lot of pressure. They have enjoyed 7 million unique visitors a month for some years now. They will need to work hard to maintain that number of customers as no doubt a large number of sellers will start listing on the Amazon platform as well.
We will surely see a number of local services and listing tools integrating with Amazon over the coming 12 months to make that process easier. At ReadyToShip and Costumes.com.au we have already started looking at Amazon as an integration partner.
What will the affect be on local Logistics/Freight operations?
Well, I think Amazon’s volume might be attractive to local providers like Australia post etc. But I think over the longer term Amazon will be a competitor to them, just like they will be a competitor to retailers. Amazon has been working hard in the US to shorten delivery times to consumers and make delivery cheaper. They do this by investing in infrastructure such as delivery services (they have their own plane fleet in the US for example) and distribution centres.
I can imagine them trying to optimise their delivery experience by looking at their own infrastructure down the track.
In any case, Amazon properly arriving in Australia will indeed shake up the retail landscape. how fast could they grow? We don’t really know. But after spending years watching over the fence, well, once they get into our yard… watch out.