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EXCLUSIVE: Amazon Prime Sale Under Investigation By Federal Aurhority

Amazon’s 36-hour Prime Day sale is believed to be under investigation by the Australian Competition and Consumer Commission after several retailers complained to ChannelNews about what they described as ‘bait’ marketing and ‘extremly short period  flash promotions’ during the 36 hour sale.

Concerns have also been raised about the sudden rise in the price of goods shortly after products had been promoted as discounted with retailers claiming that on several occasions the goods were only on sale for ‘minutes” an issue the ACCC has said is a potential problem.

In a statement to ChannelNews the ACCC said “Bait advertising is the illegal practice of advertising specific prices (usually special ‘sale’ prices) on goods that are not available or are available only in very limited quantities (where this limit is not clearly and specifically disclosed)”.

“Bait advertising has the potential to mislead consumers by attracting them to a retailer making a special offer that in actual fact is not reasonably or genuinely being offered.
Goods or services advertised for sale at a discounted price should be available in reasonable quantities and for a reasonable period at that price”.

The ACCC spokesperson added “If the goods or services are in short supply or on sale for a limited time, this should be clearly disclosed. In determining what constitutes a breach of bait advertising laws, courts will have regard to the nature of the market in which the business operates and the nature of the advertisement” they said.

ChannelNews understands that the ACCC will ask for information on how much stock Amazon was holding prior to the sale. This could involve questioning suppliers and manufacturers.

The maximum penalty for bait advertising is, $1.1m for corporations and $220 000 for individuals.

Amazon Australia launched Prime in June and held its first Prime Day promotion over 36 hours on Monday and Tuesday, attracting record customer numbers and booking its two biggest days of sales since launching its retail and marketplace offering last December.

According to Bain & Co, Amazon.com.au is now the second highest ranking retail site in Australia after eBay in terms of searches – exceeding retailers such as Woolworths and Coles – and traffic is growing much faster than retailers such Kogan.com, Harvey Norman and department stores.

The Australian Financial Review claimed that While Amazon’s product range in Australia is a fraction of that overseas – 60 million stock keeping units (SKUs) compared with almost 500 million in the US – it is growing rapidly (up from 7.5 million at launch) and categories such as books and clothing have doubled or trebled in recent months. Citigroup estimates that 1.3 million SKUs are sold and stocked in Australia on a first party basis.

Bain & Co’s analysis shows Amazon is price competitive in key categories such as electronics – either cheaper or in line with prices at JB Hi-Fi and Harvey Norman – and 20 per cent to 50 per cent cheaper than former market leader Toys ‘R’ Us on toys. While its groceries range is small, it is cheaper than Coles and Woolworths on selected lines such as Pantene shampoo and Palmolive dishwashing liquid.

“Their traffic stats are very, very healthy, bigger than many of our largest retailers,” said Bain & Co partner Melanie Sanders.

“I don’t know how much [retailers] are feeling it in their sales numbers at the moment but Amazon has forced many of our retailers to raise their game in terms of their fulfilment promise,” she said.

Citigroup analyst Bryan Raymond claims Amazon’s prices and delivery costs and options were already superior to those at most listed retailers.

“The first six months of Amazon’s launch saw no direct impact on retailer sales volumes but did contribute to elevated pricing competition and a step up in CODB [cost of doing business] investment,” Mr Raymond said.

“Our analysis of Amazon’s prices, range and delivery indicate Amazon is investing for the long term in Australia. The third-party marketplace is expanding, and we expect Amazon to attract greater first party supply post the Prime launch.”

A Citigroup survey of about 100 products across five major categories – electronics, small appliances, toys, sports and outdoors and packaged groceries – and eight listed retailers indicated Amazon was cheaper on its first party range.

“We continue to expect Amazon to erode pricing and margins for some retailers, beginning in 2020,” Mr Raymond said.

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