Amazon retail is officially coming to Australia

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Amazon retail is officially coming to Australia

Amazon has finally made an official announcement that it will set up its retail business in Australia, ending years of speculation that the online retail behemoth would come to our shores.

The company released a statement saying that it was optimistic about earning the business of Australian customers.

"Amazon Web Services launched an Australian region in 2012, we launched a Kindle Store on in 2013, and we now have almost 1000 employees in the country,” the company said.

"The next step is to bring a retail offering to Australia, and we are making those plans now. We are excited to bring thousands of new jobs to Australia, millions of dollars in additional investment, and to empower small Australian businesses through Amazon Marketplace."

While no official launch date was given, rumours have speculated that Amazon will arrive in September this year.

Amazon is also said to be on the hunt for a warehouse to become one of the first fulfilment centres, taking up 93,000 square metres in either Sydney, Melbourne or Brisbane, according to Business Insider.

Amazon's arrival is likely to have an impact on the Australian consumer electronics market for both online and brick-and-mortar retailers, including market leaders JB Hi-Fi, Harvey Norman and online retailer Kogan.

An analysis from Credit Suisse estimated that Amazon was likely to capture five percent of the Australian market share over the next five years after launch. Credit Suisse's Grant Saligari told The Australian that JB Hi-Fi could stand to lose up to 33 percent of its earnings over the next five years, while Harvey Norman could lose up to 9 percent. He also said that retail outlet Myer was likely to be the biggest loser with up to 55 percent of its earnings gone.

Last year, one of the largest consumer electronics retailers Dick Smith collapsed in spectacular fashion, only to be converted into an online-only business when Kogan acquired the brand for $2.6 million

Despite going head-to-head in the online market, founder and chief executive Ruslan Kogan has remained optimistic about Amazon's arrival, saying that it would only encourage more vendors to switch to online distribution.

"At a high level, the potential arrival of Amazon means the biggest, hottest brands will have no choice but to put products and significant volume through online channels," Kogan told shareholders in November last year.

"In doing so, they’ll need to let go the fear of upsetting the traditional retail channels to which they’ve been beholden. 

"With traditional channels facing continued consolidation, the path to market in Australia is begging for diversification. I expect we’ll see a change in behaviour from major brands and suppliers that will only create opportunities."

JB Hi-Fi chief Richard Murray has also kept optimistic, warning Australian's not to buy into Amazon's hype. He told the American Chamber of Commerce in November that the power of JB Hi-Fi's store footprint would dampen the impact of Amazon's arrival, according to The Australian.

“Now obviously there are some things that Amazon has done very well, but the thing about it, be it Amazon or Alibaba or any of these pure plays is that I guess, the hype and the reality are always a challenge ... and you have to be careful not to overreact," he said.

“There are plenty of retailers that have burned millions of dollars investing early in dotcom.”

Harvey Norman chairman Gerry Harvey has lobbied for years on behalf of brick-and-mortar retailers against the 'unfair advantages' online retailers have by not being forced to apply GST. In 2015, the federal government passed laws forcing companies to apply GST to sub-$1000 purchases to online purchases, which came into effect earlier this year.

Since the announcement early this morning, Kogan, JB Hi-Fi and Harvey Norman shares have gone relatively unscathed, all taking slight share dips of less than one cent at the time of writing.

Amazon was founded in 1994 as an online book retailer and has grown to become the largest retailer in the US. Its cloud business, Amazon Web Services, accounts for less than nine percent of the company's global revenue, but represents 56 percent of Amazon's total operating revenue.

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