Australia: Will Amazon's magic work in its newest market?

Jimmy 3x3 | 7 Views | 2017-12-05T19:05:47+00:00

The online retail giant launched in Australia on Tuesday, hoping to seize market share in one of the world's richest countries.

The Seattle-based company will let Aussie shoppers buy millions of products across 20 categories in the country, including electronics, toys and clothing.

Media speculation in Australia had strongly suggested Amazon (AMZN, Tech30) would launch in time for last month's Black Friday and Cyber Monday shopping bonanzas. It may have missed those events, but it still comes in time for the busy festive season.

The U.S. company, which has a market value of nearly $550 billion, has pledged to invest hundreds of millions of dollars and create thousands of jobs in Australia.

The country's e-commerce market is growing at more than 13% per year and is expected to hit more than $20 billion by the end of 2018, according to research firm IBISWorld. That's still a drop in the ocean compared with the U.S., where the online retail market was close to $300 billion last year.

IBISWorld predicts Amazon will initially lose money in Australia as it focuses on getting a foothold in the market as quickly as possible.

Kim Do, an analyst at the firm, said she expects Amazon to offer prices as much as 30% lower than those at established Australian retailers.

Local companies are already feeling the heat from Amazon's entry.

Graham Cooke, an analyst at price comparison site Finder.com.au, said brick-and-mortar stores have been bolstering their online offerings ahead of the launch.

Amazon is also going up against existing Australian e-commerce platforms such as Kogan.com.

The U.S. company isn't offering all its premium services like Prime in Australia straight away. That reflects the difficulties of arranging deliveries in a country the size of the lower 48 American states -- but with less than a tenth of the population.

"While the company is known for same-day delivery, this could prove difficult in a country as big and expansive as Australia," Cooke said. Another issue is Australia's internet, which is among the slowest in the developed world.

Ahead of the launch, Amazon set up a huge distribution center near Melbourne, Australia's second-biggest city.

The tech giant is offering Australian shoppers free standard delivery on orders over 49 Australian dollars ($37).

Orders within big metro areas like Sydney can be delivered in a little as one working day at premium shipping rates, Amazon said. Delivery times in the country's more remote regions can run as long as 10 business days or more.

Online shopping isn't as popular in Australia as it is in some other countries. Figures from IBISWorld show that e-commerce sales make up just 7% of Australia's overall retail market compared with about 12% in the U.S.

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