Mixed reaction to Amazon’s entry into Australian market

Amazon’s entry into the Australian market this week has seen the American giant claim its first day sales far exceeded its expectation, with the the total amount of orders being "higher than for any other launch day" in the rest of the world.

Social media responses and some of its retail competitors have been critical of Amazon’s shallow range of initial offerings and higher-than-expected prices.

But financial analysts have warned that Australians need to look at the bigger picture, and that Amazon’s strategy in some other countries has been to start slow and build up.

They say that Amazon’s low-key launch was strategic, to test the market and to ensure its delivery systems lived up to their promise and not generate any negative consumer feedback.

Analysists suggest that the company’s plan is to build up its product range in the next 12 months – with Amazon Music part of the upcoming offering – and that things will change when Amazon Prime is introduced in mid-2018.

"One would be foolish to underestimate the potential of Amazon’s business in Australia based on the current launch," Bain and Company partner Melanie Sanders told the Australian Financial Review.

Sanders predicts that Amazon is set to become Australia’s sixth-biggest retailer in five to 10 years with sales of $8 billion to $10 billion.

The first five will remain Woolworths, Coles, Bunnings, Aldi and Metcash’s IGA network.

But it is expected to overtake Harvey Norman, Kmart and JB Hi-Fi.

With 45% of Australians already shopping on Amazon sites overseas, it is estimated that they already generate US$760 million in sales a year.

The general impression is that Amazon won’t make a drastic impact this Christmas but will be a contender for the 2018 holiday season.

One effect of Amazon’s arrival has seen the price of Nintendo’s Switch drop from A$470 to $399.

The Australian Music Retailers Association (AMRA) says that music stores still offer something that Amazon never can – the experience of buying CDs and vinyl and discovering new music in-store – and that music stores will focus more on this point of difference.

“It’s (still) just business as usual,” the association said.