Amazon, the US online retail giant, is looking to setup its grocery stores and online supermarket in Australia which has been in the making for a few years now, aiming to cement its presence in the country in a move that is leading to serious concerns among some of the Australia’s retailers.
Amazon already has a presence in Australia via its online retail book business through its UK subsidiary “The Book Depository”, which was founded in 2004 and later acquired by the online retailer in 2011. The company also has a large presence in Sydney as it operates its Amazon Web Services division out of their office located in Park Street. However, with the Australian Government likely to impose Goods & Services Tax (GST) on imported goods (slated for July 2017), the need for a warehouse within the country will enable the online retailer to offer a large range of products and eventually take complete control over the last mile delivery of its goods from third- party logistics companies. Australians households are currently said to be spending a great amount on Amazon websites for purchases and if the company can offer a large product mix directly delivered from its warehouses, revenues are expected to spike multi-fold from present levels. Citi has estimated in its August report that Amazon can generate between $3.5 billion and $4 billion in Australian sales within five years of launching if market entry is done within two years.
Talking specifically about the Amazon’s online grocery delivery service, Amazon Fresh, there are good chances that the service can have a disruptive force on the Australian grocery market. At the same time, challenges may prevail for the company in developing the supply chain and dealing with the lower capital population density. Some experts feel that the move to setup a platform within the country could offer some opportunities to the retail sector in Australia. It could encourage the retailers in the country to improve their online shopping experience, which can be a good outcome for the local industry and consumers alike. In addition, the promptness with which Amazon delivers its products to consumers might encourage others to scale up their operations and improve efficiency.
Nonetheless, Amazon’s entry in the Australian markets is expected to lead to some disruption in business for local retailers, and it will then be good to see how the companies strategize to address the challenging market conditions.
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