Consumers hoping Amazon’s attempt to win Australian market share will herald an era of bargain prices will be disappointed, but that doesn’t mean local retailers are in for an easy ride.
Morningstar analyst Johannes Faul expects the US retail giant to account for five per cent of all retail spending in Australia by 2028, winning a $24 billion market share by emphasising quicker and cheaper deliveries rather than dramatically lower prices.
Since launching locally in December, Amazon has sold items at the bottom end of – but not below – the online price range of its competitors.
‘We couldn’t find evidence suggesting Amazon pursues a strategy solely based on aggressive discounting across all categories, nor competitors adjusting prices down either pre-emptively, or to match Amazon on every item,’ Mr Faul said.
‘In many cases, Amazon AU dynamically adjusts its prices to follow competitors both on the way up, as well as down, ensuring it remains close to the cheapest price.’
The newcomer boosted local distribution capabilities in August with the opening of a second Amazon Australia warehouse in Sydney – a facility twice the size of the first in Melbourne.
‘We see the online giant offering industry-leading delivery times and the lowest delivery fees,’ Mr Faul said.
‘Leading click-and-collect platforms are unlikely to be beaten by a pure online player, but we expect Amazon AU to improve delivery times as the national distribution network expands, capturing market share.’
Mr Faul believes Amazon’s slow start led to shares in companies including Super Retail Group – which operates Super Cheap Auto and Rebel Sport- and Bunnings and Coles owner Wesfarmers being overvalued.
Conversely, Mr Faul said the looming fear of Amazon’s dominance has led to Myer being oversold.
He acknowledges that department stores will be among the businesses most challenged by Amazon and to face significant closures, but Mr Faul nonetheless values its shares at 63 cents compared to their price of 51.25 cents at 1230 AEDT on Friday.