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Amazon Entry Expected to Kill Australian Retailers with Steep Discounting?

Key Takeaways:

• It is expected that Amazon will be launched in Australia with million items and will achieve a 1% retail share in first year of operation 
• as a e-retailer has relatively high customer engagement as compare to other competitors measure by the number and strength of customer reviews within the category of electronic product category. 
• Australian market entry of Amazon would improve the supply chain as it is potential channel for small and medium size retailers.  

Amazon Entry in Australian Market

There has been speculation about Amazon’s entry in Australia. Global competitive scenario removes high gross margin and inputs low cost. Pricing remain a competitive sword in the battel of retail sales. With Amazon’s two-day prime delivery switching to more short lead time purchases from stores to online and traffic reduce in the shopping malls. Immense opportunity exists for global players in retail sector to increase distribution using Amazon platform. Amazon compares prices from the other sites and recommend the discounted amount to its seller on the products or the inventory items. The seller then end ups keeping the discounted prices.

What Types of Product will Amazon Launch in Australia?

Amazon Australia’s website will have many ranges of products that would be available for purchasing. Products such as laptop, computer accessories, monitors, kitchen appliances, vacuum cleaners, heaters, cables, toys, head, lingerie products, headphones and speakers. The company will also launch ‘home brands’ line of products. The company is also thinking of making food delivery a priority and thinking of launching different “Amazon Fresh” site. 

What Impact (Short-term & Long-term) will Amazon’s Entry have on the Australian Retail Sector and its Players?

Amazon will have a disruptive impact on retail sector, when the business operation will reach a critical retail share. The entry of Amazon in the Australian retail market is expected to have an immediate impact on the retailers selling electronics, apparel and cosmetic products. Major retailers of the market such as Woolworths and Coles started strategizing marketing options to keep a competitive edge with the online retail giant, compelling them to ramp up their e-commerce operations. Speaking about the long-term impact, the disruptive affect would be realized, when Amazon will exceed 6% share retail in any of the product category. Entry of Amazon will challenge the economy of established business models. Keeping in mind the consideration such as retail basket mix, pricing, supply chain, channel mix and shopping frequency. 

Follow up sales and attachment can cause excess pricing this can be reduced by Amazon’s business model because of it active price management and competition from third party distributors or sellers. Amazon has impacted margin all across the globe by lowering prices in profitable product categories and reducing the variety of profitable products that are sold by retailer. In Australia supply chain environment is often high cost and complex. Thereby, the extent to which third party vendor and Amazon can bring global pricing and sourcing to the Australian’s market is expected to drive changes to end product pricing and supply chain cost. 

Figure 2: Total Online Retail Sales in Australia, March-July 2015 (USD Million)


What Opportunities does the Australian Retail Market offer Amazon to Incentivize Operations?

Australia has a total population of nearly 24 million, out of which almost half of the population lives in Sydney, Melbourne, Brisbane and Perth. Amazon is setting up its first fulfilment centre in Melbourne in an area of 24000 sq. mt. which will create hundreds of jobs. Such small demographics provides an easy opportunity for the smooth flow of the operations in the region as compared to other busy regions where the company operates. Moreover, consumers in the region have shown a keen interest in the entry of Amazon on the back of exclusive discount offers and marginally lower prices when compared to other retailers

Amazon IoT Products & Services to have Impact on Australian IoT Market?

Over the past years, whole world has watched transformation of Amazon from an e-commerce website to one of the largest and diverse technology company in the world. Currently, Amazon is on of the leader in several emerging tech sectors that includes Internet of Things and cloud computing. Amazon Web Services (AWS) is line of cloud based products and services that provides businesses with tools that is needed to build an online presence, with provision of Amazon with a huge revenue stream coupled with impressive margins. One the brand of AWS is AWS IoT, which is a managed cloud platform that enables connected devices to securely and easily interact with other cloud application and devices. AWS IoT can process and route billions or trillions message to AWS devices and end points, allowing users application and device to communicate with other all the time. Example for IoT products that amazon has Echo and Dash Button. 

According to the recently published report by TechSci Research, “Australia Internet of Things (IoT) Market, Competition Forecast & Opportunities, 2010-2020”, country’s e-commerce market is projected to grow at a CAGR of more than 36% during 2015-2020. Internet of Things (IoT) market consists of objects or things that are connected to the internet which can be accessed from anywhere. It comprises the integration of sensors and devices that are connected to the internet over fixed or wireless networks. Australia Internet of Things (IoT) market is expected to grow during the forecast period on the back of rising demand for smart devices like watches, phones, fitness bands etc., increase in development of cloud-based application and technological advancements. Moreover, IoT has reformed the way administrations across industries to interact with their customers and help them in their business processes.

Amazon a Disruptive Force in India 

India is liberated with small shop with more than 14 million. The overwhelming majority of number reside in 600 square feet shops. These so-called mom-and-pop stores has limited inventories and high prices, but many rural areas have these kinds of options only. Recently, India government has stringent FDI restriction to protect these kinds of convenience store owners as when amazon entered India the retailers were scared that the online behemoth would put them out of business. Amazon, instead enlisted mom and pop stores owners as partners in its delivery platform. In remote and village area, where only limited people has internet connection, residents in these areas can now go to their local store and use the owner’s net connection to buy the required goods from amazon. These small store owners record their order, inform customers, when their products are delivered to the store address, collect the cash payment and send money deducting handling fee to the amazon. From this business model Amazon has structure/reinvented the ecosystem to address the challenges faced by e-commerce platforms in India. 

How Amazon Delivers Products Smoothly even in Country like India, Where Supply Chain as a Concept has just Picked Up Pace? 

Amazon has contracted with number of major delivery services provers in the country, which includes Cargo Airline and Blue Dart and Indian Post. Just recently, Amazon started its transportation services to augment delivery, where it utilizes motorbike and bicycle couriers to reach remotest as well as urban areas. 

E-commerce Sector to Grow with Double Digit CAGR in India 

E-commerce industry is fast growing in India, many changes of have been seen over the years. The sector grown over 34% since 2009 to 2015. E-tailing, which comprises of online retail and online marketplaces. Accessories, apparel, books and electronic are the largest selling product category and constitute 80% of the product distribution.  The growing use of Tablets, internet broadband smartphones, and 3G has led to developing a strong consumer base likely to rise further in coming years.

According to the recently published report by TechSci Research, “India E-commerce Market, Competition Forecast & Opportunities, 2010-2020”, country’s e-commerce market is projected to grow at a CAGR of more than 36% during 2015-2020. E-services segment, which comprises online travel, online payments, online classifieds, etc., is expected to continue its domination through 2020. However, the e-tail segment that includes electronics, apparels & accessories, health and personal care, etc., is expected to witness significantly higher market growth compared to e-services segment over the next five years. During 2015-20, the western region is expected to remain the largest e-commerce market in the country. Major players operating in India’s e-tail market include Flipkart, Snapdeal and Amazon.

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