Amazon.com opened today in Australia, ending months of speculation. The American e-commerce giant has long sold Kindle books and other intangibles through its Australian website, but today it started taking orders for physical goods to be shipped from its suburban Melbourne warehouse. Products are being offered both direct from Amazon and from third party sellers through the Amazon Marketplace.
Australian retailers are confident they can beat back Jeff Bezos’ Amazonian empire. The chairman of Australian homeware and electronics retailer Harvey Norman reportedly called the arrival of Amazon “lame” and a “non-event.” And Australian retail stocks rose on perceptions that Amazon’s Australian offerings were not all that impressive. Complacency is the order of the day.
How wrong they are.
Australia is a retail market ripe for disruption. In this continent-sized country of 24 million people (a little bigger than Florida, a little smaller than Texas) there are just two major supermarket chains, two major electronics retailers, two major department stores, two major home improvement chains … you get the idea. Every industry is an effective duopoly, and has been for years.
These comfortable market conditions have long been a bone of contention among Australian consumer groups — and Australian farmers, who have had no choice but to sell their fresh produce to the big duopolists. The chummy Australian market has also bred miserable customer service practices. Most Australian retailers don’t even accept returns, but will only allow exchanges of defective products. If you buy something but then find it cheaper somewhere else, or just change your mind, too bad. Your loss.
Soft opening, hard impact
Amazon’s opening today is too late to have a big impact on the 2017 Christmas shopping season. It’s more like a “soft opening” designed to work out all the kinks in time for 2018. I’ve been a regular Amazon customer for more than a decade, registered on Amazon.com with an Australian address, and they didn’t even send me an e-mail to let me know they had opened. My first impression is that neither the prices nor the variety of products on offer in Australia are anything like those of Amazon in the United States.
Amazon’s one unique Australian selling point this season is free delivery on orders over $49 Australian dollars (about $37.50 U.S. dollars). Few if any major Australian retailers offer free shipping. And if my own personal experience is anything to go by, even fewer Australia retailers offer fast shipping.
What complacent Australian retailers (and retail analysts) don’t seem to understand is that Amazon doesn’t really make its money selling stuff cheap online. It makes its money selling cloud services to other businesses that sell stuff cheap online. Amazon’s top cloud customer, Netflix, is now the most-recommended brand in Australia. It only opened in Australia in 2015, but already nearly one-third of all Australian households subscribe.
None of the top 10 most recommended brands in Australia are, in fact, Australian , according to research from YouGov. That’s not surprising. Most Australian companies are used to providing low quality services to a captive market at a relatively high price. With Amazon’s arrival on the continent, all of that is likely to change.
That doesn’t necessarily mean that Australian companies won’t survive the competition. There are reports that some are already raising their game to meet the challenges posed by Amazon. What Amazon’s arrival does mean for Australia is that local companies will have to get a lot better at what they do, if they want to survive. Either way, the big winners will be Australian consumers, whether it’s Amazon or an improved local firm that ultimately makes the sale.