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Amazon Tipped To Hit CE Retailers Hardest

Latest research from IBISWorld forecasts that technology products will be Amazon’s “highest selling category”, with electronic goods retailers and department stores tipped to be the “hardest hit”.

Senior Industry Analyst for IBISWorld, Kim Do, affirms that Amazon Australia’s entry will “shake up” the local retail sector, and likely take market share away from traditional retailers:

“Technology products are anticipated to be the highest selling category for Amazon, which will disrupt the electronic goods industry. Australian consumers are particularly price savvy when it comes to electronic goods, and will often compare prices across multiple retailers to find the best value. As a result, Amazon is expected to take market share away from local electronic goods retailers such as JB Hi-Fi and Harvey Norman”

“Amazon’s imminent arrival into the Australian market is set to shake up the retail sector”.

Ms Do supports ChannelNews’ recent reports, affirming that the e-commerce giant will offer heavily discounted products, compared to current prices of local retailers:

“The company intends to challenge domestic retail prices by offering items for 30% less than domestic retailers. This is expected to appeal to price-conscious Australian consumers, and is likely to affect local retailers that have found it difficult to adjust to a shift in consumer spending behaviour over the past five years”.

“The company is expected to focus on providing consumers with low prices, a diverse product range and fast delivery”.

Consenus is, Amazon is prepared to make initial losses in a bid to quickly gain market share in Australia.

[HP consumer electronics on Amazon Australia]

Ms Do warns that the American giant will need to re-calibrate its business model to be successful in Australia:

“However, to be successful in Australia, Amazon’s current business model will need to be adapted to the Australian market. For example, Australia’s large geographical size and dispersed population will lead to higher distribution costs compared with Amazon’s home market in the United States. This is likely to limit the company’s ability to offer Amazon Prime Shipping services in the short to medium term”.

IBISWorld’s latest research states that Australia’s online shopping industry is set to grow 13.5% (annualised) over the next five years to A$20.1 billion.

At current, online sales represent 7.4% of total retail spending, however, this is forecast to hit 15% by 2022 – 2023.

The research firm believes that Amazon Australia provides “an opportunity” for existing local retailers, with the e-commerce giant tipped to drive innovation across digital transformation, logistics optimisation and multichannel platforms. Amazon Australia also presents retailers with another platform to sell their products.

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