Amazon’s subscription offering, Amazon Prime, has finally landed on Australian shores. Will this be a game changer for the Australian retail industry? Shashank Venkat finds out
Amazon’s Australian launch
last year may have been a little underpowered with a limited inventory, but it looks like the e-commerce giant is now ready to go all out down under. Earlier this week, the company finally launched its popular Amazon Prime subscription service in Australia
, ending months of speculation over its imminent launch.
Australians can now subscribe to Prime at AU $6.99 per month, or AU $59 per year which is roughly half the cost of the service in the US. The company has also sweetened the deal for early birds by launching a 30-day free trial and an introductory offer for just AU $4.99, which will be available until 31st
January 2019. Amazon Prime will give subscribers access to free deliveries, as well as including Amazon Prime Video, Prime Reading, Twitch Prime, discounted priority deliveries and Alexa shopping (voice-based shopping on Alexa-powered devices).
However, the Prime offering in Australia will not yet provide all the features available to subscribers in the US and other countries. For instance, Amazon offers free same-day or next-day delivery on many items in the US, whereas Amazon Prime in Australia promises only two-day free deliveries in all major cities, with the exception of Darwin, and in some regional cities. In more remote locations, Australian Prime subscribers will get free deliveries in four to five days.
The Australian retail battle heats up
It remains to be seen how the US retail giant shakes up incumbents in the space. But it is certain that the launch of Amazon Prime will put a lot of pressure on local retailers to keep up with the discounts, free deliveries and convenience that the subscription program offers.
In our report on Amazon’s launch in Australia, we described how local retailers such as Myer, JB Hi-Fi and Harvey Norman will face the heat from Amazon. Analysts also predicted that Amazon will smash retailer revenues by 55% over the next five years. According to new research by Morgan Stanley
, retailers are already struggling to keep up with Amazon’s discounted prices. While Amazon may have started slowly down under, it has competed aggressively by rolling out new offerings and improving its services. With price pressure increasing in Australia, traditional retail businesses will have to walk a tightrope to lower prices and improve profit margins. And once Australian consumers sign up for a Prime membership, it is unlikely that they will shop elsewhere.
In fact, Australian retailer JB Hi-Fi has already had to cut prices
at the expense of its profit margins to maintain market share and compete with Amazon. It even downgraded its full-year earnings forecast
recently citing ‘challenging conditions’ in the home appliance market.
The Australian government has levelled the playing field a little bit for local retailers by introducing a new Goods and Services Tax (GST) regime
which comes into force from 1st
July 2018 onwards. Until now, offshore retailers didn’t have to pay Australian GST for overseas purchases under AU $1,000, but following this new regulation, Amazon will stop shipping
to Australia from its overseas commerce sites. The retailer will, instead, redirect customers to its local Australian site.
The Amazon.com.au site offers 60 million products compared with 480 million products available on the US version. While Amazon has enabled a global store option on its Australian site (which will be compliant with the new GST regime), the availability of products on the global store is significantly lower compared to the products available on Amazon.com.
The Amazon Prime launch may temper some of the backlash Amazon has received after its decision to stop allowing Australian customers to shop from its other international sites. Amazon is also set to grow its network of fulfilment centres in Australia, potentially enabling faster deliveries for more regions in the country. Ambitious as ever, it looks like Amazon is well-placed to dominate the Australian retail marketplace as well!
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