Citi Predicts Amazon Will Push Oz Retail Down 10%
Market analysts at CITI have predicted that the arrival of Amazon will have an impact on the bottom line of Australian retailers in a way that is both widespread and immediate.
They estimate that electronic goods will make up about 44% of Amazon’s local sales, tipped to total about $4 billion a year.
In a note published earlier this week, they estimate that Amazon’s strategy will see them sell consumer electronics for about 15% less than Australian retailers, with goods worth less than $1000 often leveling out to 20% cheaper.
In response, they argue, local retailers will be forced to push down their own prices 10%.
CITI analysts say that this strategy will in turn have a direct impact on the profit margins for bigger retailers like Harvey Norman and JB Hi-Fi.
They say the margins of the former will be hit for 2.5% while the latter slips 1.8% over the next three to four years.
According to CITI analyst Brian Raymond, “we expect the electronics industry to likely consolidate further, as retailers rationalise store footprints from the current over-stored position.”
Amazon-related searches have risen by 93% in Australia since July last year as an increasing number of consumers seek out information about the online retailer’s local launch.