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Is 2017 the Year for Amazon in Australia?

by simon
Rumors of the imminent arrival of Amazon in Australia have been circulating for a decade.

Going by recent media reports, Amazon could be doing business directly in Australia by September.

The company has not made any announcements, but financial analysts following the clues say Amazon will open for business in Australia by September.

The Sydney Morning Herald reported last September that Amazon was on the hunt for a warehouse, reporting that an industrial park west of Sydney as a potential purchase target, and had already set up data centers for its digital backbone.

According to a December 21 article in the Australian Financial Review, Amazon has been renting office space in Sydney. All this amounts to the first concrete evidence that those rumors are now coming true.

"There have been rumors for the last 10 years,” Alphinity Asset Management portfolio manager Bruce Smith told the AFR. “This time it looks more credible, but what form it takes is unknown."

Despite all of these signs, media have not reported why anyone expects to see Amazon in Australia by September.

Ramifications of Amazon in Australia

Amazon is expected to disrupt Australian retail as it has in the US. Retailers may even feel the pinch more acutely, after enjoying high profit margins over the years.

A Citigroup report predicts profits at JB Hi-Fi, Harvey Norman, Myer and Super Retail Group could fall by 20% or more, in the face of falling retail prices, along with Amazon’s free shipping options.

Australia’s retail market is estimated to be worth AU$221 billion a year. The only thing that has limited Amazon’s presence so far (Amazon has had digital services in Australia for some time) has been logistics, according to the Citi report.

"Amazon's recent investment in fulfillment in the US should provide solutions for the vast distances in Australia," the Citi report says.

Establishing logistics and distribution centers in Australia will pave the way for Amazon Prime, which is notable for including free shipping on many purchases.

Existing retailers have taken notice. Woolworths has established a specific unit to respond to Amazon. Wesfarmers is coming up with ways to expedite distribution and improve physical  and online sales channels. Companies are securing long-term agreements with suppliers.

Suppliers will now have a new lucrative marketplace to reach customers, but they will have to strike a balance and decide what SKUs to sell through Amazon, and what to sell through their other trading partners.

If Amazon follows its pattern in the US, Amazon will most likely have options for Amazon Sellers, when the supplier owns the inventory and Amazon Vendors, where Amazon buys from the supplier. There also will likely be options for sellers to use Fulfillment by Amazon (FBA) and for Amazon Dropship.

Are you ready to do business on Amazon in Australia? Find out how to manage your inventory directly when selling through Amazon.