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Happy day for retailers as Amazon fails to live up to the hype

Australian retailers have breathed a sigh of relief and enjoyed a healthy bump to their share prices after their worst fears about Amazon outgunning them on price and service failed to eventuate. 

The American e-commerce giant sent its Australian website live with "millions" of products for sales on Tuesday, offering next-day deliveries and discounts of up to 30 per cent on popular toys, kitchen appliances and fashion brands. 

But retail analysts said Amazon's prices were not as aggressive as expected and was unlikely to spoil Christmas for local retailers. 

Discretionary retailers' shares have been under pressure for months amid speculation about how Amazon would affect their earnings,but they received a welcome boost as Amazon revealed its hand. 

JB Hi-Fi and Harvey Norman's shares were the two best performers on the ASX200, jumping 6.76 per cent and 6.25 per cent respectively, while Supercheap Auto owner Super Retail Group closed up 3.1 per cent, and Myer rose up 1.3 per cent. The broader market fell 0.23 per cent. 

Harvey Norman chairman Gerry Harvey said Amazon's launch was a "non-event", and welcomed his company's share price recovering some of the losses it has suffered due to Amazon "hype".

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"It's just amazing that this sort of thing can gather this sort of momentum and ended up so lame," Mr Harvey said.

The company's shares were as high as $5.17 in January, closed at $4 on Monday and gained 25¢ on Tuesday.  

Amazon was selling some popular electronics items significantly lower than Harvey Norman, and Mr Harvey said he would match those prices.

"We're below them on a lot of stuff, and we've got a whole heap of stuff they don't even sell," he said.

"In Singapore and Malaysia, we're dealing not just with Amazon but Alibaba and the lot and our sales are going up over there, not down."

Citi retail analyst Bryan Raymond said Amazon's range was "patchy", with more than 40,000 toys and games from big brands available, but no televisions for sale yet. 

The bulk of items listed were being sold by third-party sellers who had slower delivery times, while Amazon built up its distribution infrastructure. 

"Based on the current offer, we expect Amazon will not be disruptive to Australian retailers this Christmas," Mr Raymond said.  

Morgan Stanley analyst Tom Kierath said Amazon's initial offer to Australians would be less disruptive to local players than expected, with weak product range, and delivery times that lagged incumbent retailers.

JB Hi-Fi, for example, offers same-day delivery for $9.99, compared to Amazon's next-day delivery for the same price. 

Amazon's prices on consumer electronics were higher than competitors, Mr Kierath said, and it appeared it was instead going after Australia's supermarket giants Coles and Woolworths by undercutting them about 13 per cent on dry groceries such as dishwashing liquid, hand wash, and nappies.  

"Amazon isn't always uniformly cheaper than the competitors but does go after certain categories, usually consumer electronics," Mr Kierath said. "Based on our analysis it looks to be groceries." 

Another analyst, who asked not to be named, was also unimpressed Amazon's prices and delivery options, noting that Woolworths was trialing one-hour home delivery from four stores in Sydney.

Mr Raymond said Amazon would start to pose a real threat to local retailers when it launches its Amazon Prime subscription service, slated for mid-2018, which lowers shipping costs, and in some markets enables free two-hour delivery. 

Steven Kulmar, from consultancy RetailOasis, said Amazon typically started with only a few core product categories when it launched into a new market. Launching with more than 20 categories in Australia showed it was confident of success. 

"I think they've worked out that the Australian market is ready for them and the more they serve up to us the more we'll accept," he said.

Another challenger also arrived Tuesday in the form of sportswear retailers Decathlon opening a flagship store in Sydney. The French retailer was already generating about $100,000 in sales a month online, according to IBISWorld. 

Retail spending jumped to a five-month high in October, data released by the Australian Bureau of Statistics on Tuesday showed, after shoppers forked out on clothing, footwear and accessories (up 2.5 per cent) and eating out (2 per cent). 

Total spending rose 0.5 per cent in October, up from 0.1 per cent in September, pushing annual sale growth up from 1.5 per cent to 1.8 per cent.