Amazon – Expected impacts are over-hyped…

As we are now all aware, Amazon is launching in Australia in 2018, with distribution facilities likely to be operational by 2018/19.

The Australian market has all the key fundamentals for Amazon to make solid inroads. Australians already shop with Amazon – spending around $500 – $1 billion on Amazon businesses per year. Ebay has been operational since 1999 and achieves more than $4.5 billion in annual revenues in Australia.

Most analyst research lands on similar forecasts for Amazon by around 2025/2026, with estimates of around $13 – 14 billion by FY2026. So, what does this mean?

  • It equates to around $1.9 – $2.0 billion per year in growth, which is equivalent to 2 – 3 regional shopping centres being added to supply per annum, across Australia.
  • This impact will be widely distributed An individual centre will not have a new regional shopping centre on its doorstep, rather the additional competition will take a small slice from everyone – including existing online retailers (e.g. Ebay).
  • At a centre level, the impacts of Amazon will take a while to wash through and some centres will be much more susceptible than others.
  • Impacts from a new physical development within, or near a centre’s trade area will hurt far more than the impacts from Amazon. E.g. a new supermarket could impact a sub-regional centre by $10 – 20 million.
  • Some tenants and/or retail categories will be relatively immune or much more resilient than others, of note: supermarkets/food; food catering; services; ancillary non-retail categories – like medical, gyms, childcare; and ‘bulky goods’ retailers.
  • The tourism dollar will also be relatively immune to Amazon’s effect, with spending from tourists generally expected to be directed to physical stores. This is a key growth sector for Australia.

In summary, Amazon will not destroy the Australian bricks and mortar retail industry, however some retailers/categories will be at risk. We expect some retailer attrition and retailer consolidation.

Shopping centre owners and retailers should be proactive, and prepare their Amazon strategy before it’s too late.

Should you wish to discuss the Amazon effect and retail trends more generally, please contact James Turnbull, National Head of Retail on turnbull@macroplan.com.au or 02 9221 5211.

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