Australia’s retail industry has managed to overcome the threat of global eCommerce giant Amazon, a new UBS report has found.
There were initially grave concerns for Australian retail brands when Amazon first launched its Australian website in 2017, with share prices falling sharply.
However, this latest report suggests these fears were overstated, with a lack of variety holding Amazon back.
“Range is the key impediment and we don’t see a material impact to incumbent retailers near [the] medium-term until this improves,” the report said.
“We believe Amazon’s ability to get key brands and category SKUs (stock keeping unit) has been limited. Our simple range analysis confirms this – of the key electronic brands across 6 subcategories, Amazon significantly lags JB Hi-Fi.”
In terms of bricks and mortar versus online retail, online shopping has grown 14 per cent over the past three years, however, this growth has slowed since February 2019.
With online shopping still only accounting for around nine per cent of retail sales, the UBS report suggests Australian brands should leverage their bricks and mortar sites to improve online penetration.
“While online sales growth should continue to outpace in-store sales, shoppers flagged stores are not dead,” said the report.
Despite encouraging signs for Australian brands, the report does suggest Amazon has established itself down under.
According to the report, 28 per cent of Australian shoppers having used Amazon and about 38 per cent expecting to purchase from it in the future.
“In our view, the key question for investors is: will Amazon be a major shopping destination for consumers? Around 28 per cent of shoppers surveyed said yes,” UBS said.
“While high, it’s down year on year with range being Amazon’s key issue. Our analysis of SKU count across 12 key electronics brands suggests Amazon’s Australian range is roughly 33 per cent that of JB Hi-Fi.
“Around 42 per cent of shoppers flagged Amazon is unlikely to be their primary shopping destination in 2019 vs. 28 per cent which said yes. This is a deterioration vs. the 2018 study.”
