Retailers brace as Amazon launches in Australia

[SYDNEY] US internet giant Amazon launched in Australia on Tuesday with retailers scrambling to cut costs and boost their online offerings as they brace for an expected shake-up of the sector.

The arrival of the behemoth - which has grown from being an online bookstore to one of the world's largest firms - poses a threat to a market already grappling with weak consumer confidence amid tepid wages growth.

"Focusing on customers and the long-term are key principles in Amazon's approach to retailing," said Amazon Australia country manager Rocco Braeuniger in a statement.

"By concentrating on providing a great shopping experience and by constantly innovating on behalf of customers, we hope to earn the trust and the custom of Australian shoppers in the years to come."

The American giant is offering millions of products from well-known Australian brands, as well as small and medium-sized Australian businesses selling on Amazon Marketplace.

Online shopping only accounts for between 8-13 per cent of total sales in Australia, leaving room for growth in a sector estimated to be worth more than A$300 billion (S$307.2 billion) annually.

"We believe Amazon's full entry into Australia will likely be a success," UBS analysts said in a note ahead of the launch, adding that Australia was an "attractive market where online is under-penetrated".

"Australian online shoppers spend the third-most globally of Amazon's markets."

Retail categories most likely to be hurt by Amazon's entry include electrical, appliances, apparel and cosmetics, UBS added.

The US firm might also be willing to absorb losses initially to boost its market share, IBISWorld senior analyst Kim Do said, pressuring the profitability and margins of its competitors.

Several top Australian retailers have recently succumbed to pressure from foreign giants such as Japan's Uniqlo and Sephora of France, while others have cut back on bricks-and-mortar stores.

But other analysts said it was not all bad news for local retailers, with Amazon expected to face similar challenges such as low access to broadband and the large size of the island continent.

Amazon, a Seattle-based company, has expanded far beyond its roots as a digital bookstore, moving into the groceries and other retail sectors as well as cloud computing, streaming video, artificial intelligence and more.

It has become one of the most valuable companies on the planet alongside US tech rivals Apple, Facebook and Google parent Alphabet, and in October reported third-quarter profits of US$256 million.

AFP