Amazon set to disrupt Australian retail
Amazon has been a disruptive force to retailers all over the world. We expect its arrival on Australian soil will make it a disruptive force to all retailers here as well over the coming decade. At this stage, there is a lot of speculation about the segments of the market Amazon may choose to enter, but little in the way of hard facts.
However, we have already seen its impact though through the recent sell-off in Australian retail stocks, although some of this would also be attributable to a weak consumer and an expected decline in the new housing market reducing discretionary household purchases. But, no matter what happens with Amazon there will still be bricks and mortars stores in Australia.
Amazon has become the master of operating in the digital world and logistics. Also, its scale and sourcing capability make it a fierce competitor in a range of retail segments. It provides a great user experience and this is only going to get better as it gets closer to us in Australia.
The Australian retail sector is attractive to an online operator given the relatively high retail wages and rents, particularly for speciality stores.
For a retailer like Coles, we expect the impact on its supermarket business to be limited given the price point Amazon has targeted in the US is above that of such retailers for its online grocery business. The greater threat will continue to come from Aldi and other discount retailers which choose to enter the Australian market. However, its office supplies and discount department stores may feel the pressure.