Amazon Unveils a Two-pronged Strategy for Market Entry in Australia

Amazon, the US e-commerce and cloud computing giant is said to hire 1,000 people in Poland. The company already hires almost 5,000 people in Poland and has service centers in Gdansk, Wroclaw and Poznan ON 14 April 2016. (Photo by Jaap Arriens/NurPhoto via Getty Images)

Amazon’s decision to launch a two-pronged strategy for entry in the Australian retail market and replicate its fast-paced rollout in Spain seems to be magnifying the impact on Australian retailers. While Australian shoppers are eagerly waiting for Amazon’s entry in Australia, most of the retailers don’t know what to do about the threat from competitive standpoint.

At a recent seller summit, Amazon’s Country Manager, Rocco Braeuniger, has signalled that the e-commerce player would launch both its retail platforms, its first party offer and Amazon Marketplace very soon. However, most of the Australian retailers are in dark to come up with a strategy to combat the global retail giant’s move.

Coming back to the strategy that Amazon has talked about, it is worth noting that Amazon started selling products across at least half a dozen of categories in Spain in 2011 and launched Prime within subsequent months of entering the market; while Prime Now was launched in Madrid and Barcelona in 2016.

At the moment and in view of the historical market entries in other parts of the globe, Aussies are keeping a close eye on the way Amazon will showcase the launch.

The key things to note include that Amazon aims to have a market entry strategy revolving around:

  • Listening to the customer, inventing on behalf of the customer and delivering a great experience
  • Launching a first party offer, where it would buy products on a wholesale basis directly from suppliers and brand owners, and sets its own prices
  • Launching an active Marketplace, where individual sellers would list their wares on Amazon’s site, simultaneously, offering numerous products at one go with comparative prices.

Amazon said the monthly fee for selling on Marketplace would be $49.95 plus GST for an unlimited number of product listings. A referral fee might also be charged depending on the product. Further, the cost of fulfilment by Amazon was not revealed but sources indicated that it would be like that in the US, where sellers pay between $US4 and $US7 per item for shipping and handling, customer service and returns.

Amidst these developments, two of the Australian biggest retailers, Harvey Norman Holdings Limited (ASX: HVN), and JB Hi-Fi Limited (ASX: JBH) are seen to succumb to heavy short-sellingHarvey Norman has slipped by about 14% in last three months while JBH has been down by 7%, as at November 14, 2017.

Amazon seems to be pumping in momentum with more consumers attracted to shop online, where margins are thinner. This is expected to drive retail prices on a downswing and would eventually, force retailers to invest heavily in e-commerce infrastructure that may take some time to deliver returns.


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