Amazon’s Australia launch: will the internet giant rule down under?

Amazon’s Australia launch: will the internet giant rule down under?
After a lot of hype surrounding Amazon’s Australia launch, the company has finally taken the first concrete step towards launching a full-fledged shopping service in Australia. Will Jeff Bezos find success down under? Shashank Venkat explores

E-commerce giant Amazon has finally landed on Australian shores. Close on the heels of its Singapore launch, the company has unveiled the location of its first local warehouse in Australia and appointed one of its top German executives, Rocco Braeuniger, as the country manager. Dandenong, a South-Eastern suburb of Melbourne, has been chosen as the site for Amazon’s first Australian distribution center. Will this mark yet another significant step in Amazon’s plans of global domination?

It will be interesting to see the approach Amazon takes with in the first leg of its Australian journey. Tipped to launch sometime next year, it is widely expected that Amazon will start off with categories such as books, electronics and apparel before moving on to other items. Food delivery will also be a key focus for Amazon as it opens other distribution centers in major cities like Sydney.

Amazon’s entry in Australia will worry local retailers such as Myer, JB Hi-Fi and Harvey Norman, among others. Analysts are already expecting that Amazon will smash retailer revenues by up to 55 percent in the next five years. The company will also put pressure on logistics providers. Local players will find it very hard to replicate Amazon’s scale, logistics expertise and delivery speeds giving the e-commerce giant a significant advantage over them.

On the media and entertainment front, Amazon Prime Video is already giving stiff competition to local businesses such as Foxtel and Stan and global ones such as Netflix. With Amazon continuing to invest money into its media business, competing businesses will also have to invest in quality content to stop the Amazon juggernaut. Amazon has already surprised everyone by securing rights for live streaming sports events such as ATP Tennis in the UK and NFL matches in the US. Speculation is rife that Amazon will bid for broadcast rights of rugby matches in New Zealand. This shows that Amazon’s growing presence in the media and entertainment space is already being taken seriously by the press and industry experts.

As far as its flagship Amazon Prime Now subscription service is concerned, it is fair to assume that the company may wait a while before launching the service. The company will want to learn from the initial leg of its retail journey as well as set up more distribution centers in the country before launching Amazon Prime. However, reports suggest that the company is looking to launch Amazon Fresh (grocery delivery service) at the same time as the main Amazon website. Amazon Go, the company’s flagship check-out free store might also make its way to Australia and indeed the rest of the world, but it will take some time before the company is confident of rolling it out.

Amazon watchers will also keep a close eye on Amazon’s acquisition/partnership efforts in the region. Jeff Bezos has shown that he is willing to acquire businesses if the move aligns with his long-term objectives. Amazon caused quite a stir when it acquired Whole Foods Inc. in the US. Amazon has also entered into a strategic partnership with Morrisons in the UK to sell fresh and frozen foods under its Amazon Fresh service. It is difficult to completely rule out such a move for Amazon in Australia.

Of course, there are a lot of challenges Amazon will have to brave during its Australian invasion. While the company has promised hundreds of jobs in the region, trade unions are concerned about Amazon’s dismal labour record. Moreover, experts are also concerned whether Amazon will fulfil its tax obligations in light of Australia’s demanding 30 percent corporate tax rate. Regulatory changes such as requirement of a high percentage of local content quota (for Amazon prime Video) and ‘Netflix tax’ will also put pressure on Amazon’s low margin business.

Can Amazon overcome these challenges and steamroll the Australian market? We are watching closely.