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EXCLUSIVE: Kogan & Harvey Norman To Take On Amazon Marketplaces

Online retailer Kogan along with Harvey Norman is set to launch a marketplace similar to what Amazon is currently setting up in Australia.

Ruslan Kogan CEO at Kogan.

The big difference is that Kogan is asking for 20% margin which is similar to Amazon while Harvey Norman is asking for a 40% margin with rebates according to distributors who have held discussions with both organisations.
One distributor described the Harvey Norman margin as “The Gerry Tax”.

Kogan believes that that can be as “competive” as Amazon when the big US online retailer launches in Australia.

While Kogan has revealed increased revenues in the last quarter the Company is currently suffering from cash flow problems.

Earlier this year Australia’s biggest daily deals site, Catch of the Day, launched an online marketplace and rebranded their trading name to Catch.

The exact date of Amazon’s is not known though some partners are tipping Friday 24th of November which is Black Friday in the USA. This would allow Amazon distribution partners such as Synnex and Ingram Micro along with Australia Post to ship merchandise out over a weekend for delivery on a Monday.

Currently the company is busily sifting through more than 500 applications from third party sellers in Australia and New Zealand to participate in their Australian Marketplace which will be explained to participants at an Amazon Seller Summit on November 13.

At yesterday’s AFR summit in Sydney attendees tended to take a glass half full approach to Amazon’s arrival. They were optimistic about the opportunities that would be open to small and medium-sized businesses looking to sell their goods in a marketplace environment.

According to Amazon executives they will have 300 sellers signed up to the marketplace by the end of the year, with several major brands such as Acer, Logitech, ASUS, Lenovo and Hewlett Packard already signed up.

At Catch Group Director Hezi Leibovich, said the shift in strategy will help Catch reach a broader audience and capture higher value customers.

What some retailers are concerned about is that Amazon will move to “buy” marketshare by heavily discounting products.

The latest quarterly accounts released by Amazon in the US show the company lost money in its international retail operations. But its founder Jeff Bezos is famous for investing for growth.

The figures that jump out of Amazon’s latest quarterly accounts are the revenue growth numbers. Online store sales were up 22 per cent, third-party selling services rose 40 per cent and retail subscription services rose 59 per cent.

The latest quarterly accounts released by Amazon in the US show the company lost money in its international retail operations. But its founder Jeff Bezos is famous for investing for growth.

The figures that jump out of Amazon’s latest quarterly accounts are the revenue growth numbers. Online store sales were up 22 per cent, third-party selling services rose 40 per cent and retail subscription services rose 59 per cent.

When Amazon launch in Australia they will offers two simultaneous services their own stock (1P) and third party (3P) stock which is sold via their marketplace.

It is this structure that has caused some concern claims the AFR.

Gavin Dennis, the chief financial officer of eBay Australia, says retailers do watch closely the products sold on both 1P and 3P. But there is no evidence that Amazon uses its knowledge of 3P sales to cannibalise them through its 1P sales.

Ray Ridgeway, the managing director of payment solutions company WorldFirst Australia, says 3P sellers have an incentive to source the most popular products and source them at a cheaper price than others.

Amazon also has an incentive to ensure that its 1P products are moved quickly through the site to maximise the efficiency of its distribution centres.

Amazon’s challenges were well described by Russell Zimmerman, executive director of the Australian Retailers Association. He told the anecdote about meeting an Amazon representative on the Sunday before Anzac Day.

He said the Amazon person was unaware of the higher penalty rates paid for retail workers on holidays and weekends. Also, Zimmerman said he believed Amazon had not yet dealt with the Transport Workers Union.

“This might be fairly exciting for them,” he said. “I wonder whether they really understood both the warehousing as well as getting an in from the Transport Workers Union, that could be a challenge for them.”

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