Amazon to establish warehouse in Australia to commence business operations, retail behemoth likely to face tough challenges on the Aussie turf
Category: #retail  By Sunil Hebbalkar  Date: 2017-06-05
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Amazon to establish warehouse in Australia to commence business operations, retail behemoth likely to face tough challenges on the Aussie turf

Renowned American e-commerce and retail giant, Amazon Inc., is looking forward to purchasing a high-end warehouse in Australia to expand its operations in the region. According to reliable reports, however, the company is likely to face unconventional challenges in the land ruled by the bricks & mortal retail industry.

Amazon’s foray in Australia has not come as a surprise for industry experts. The global e-commerce magnate has been, since long, trying to establish a foothold in Southeast Asia. After having held a strong position in online retail market in the U.S., Amazon exported its business model across Europe, primarily to UK and Germany, and then branched out to Japan and India across the APAC belt. Now, by penetrating the retail market in Australia, the company plans to have inventory supplies and shipping hubs in India and Australia to serve customers across Southeast Asia. Through this venture, Amazon plans to consolidate its position in global retail industry and give a tough competition to its rival, Alibaba, which is at the helm of the retail market in China.

One of Amazon’s prime challenges regarding the establishment of its business base in Australia include the expense. The company’s officials have admitted that it is indeed rather expensive to establish and maintain a business base abroad, complete with the international operations and website transactions.

In the United States, Amazon is currently valued for more than USD 470 billion and is the most dominating e-commerce company. More than 66% of the firm’s sales in 2016 (which had then amounted to around USD 136 billion) was from the North America belt. Amazon is also currently offering the Amazon Prime subscription worth USD 99 per year, by means of which the company offers batteries, cleans products within the span of an hour, and cuts down delivery times. All in all, Amazon aims to resolves to save the consumers’ trip to the store and provide them with the complete convenience of online shopping.

To replicate this success in Australia, Amazon will need an established, loyal consumer base and a significant amount of capital, both of which seem to be unprecedented challenges as of now. As per reliable statistics, the company has suffered pretax losses amounting to around USD 2.2 billion since 2012. In addition, it has been predicted that Internet shopping in Australia, which is currently worth AUD 18 billion, will touch AUD 28 billion by 2022. Experts say that since the country has the presence of strong retail outlets such as Coles Supermarkets and Woolworths Ltd., Amazon may find it difficult to penetrate the market and sustain its position. And yet, with its wide range of product offerings, Amazon is likely to attract a local consumer pool, which Australian retailers may view as a potential foreign threat.

Australia is almost as large as the United States, however, the irregular density of population and the huge distance between the precincts are two primary issues that will hamper Amazon’s path to success. The country’s population is only around 24 million, and key populated regions are at least 2,500 miles away from one another. This is likely to significantly increase the costs of fast deliveries, which is Amazon’s flagship service. The costs of customer service in the Australian cities, right from Sydney to Perth, will disrupt Amazon’s high-volume low-margin business model, and may lead the company to face severe economic and operational difficulties.

As per industry analysts, timely product delivery and overall cost management will be the key issues that Amazon is likely to face while expanding base in Australia. The company is confident regarding its decision to purchase a warehouse and officially commence its Australian operations, despite the impending challenges.

In the event that Amazon is able to overcome the potential constraints, analysts state that the company is likely to start selling products ranging from books and electronics to groceries and clothes, by the end of 2017. In fact, it may even be possible that Amazon Prime is designed to operate from Australia’s largest cities, Brisbane, Melbourne, and Sydney.



About Author

Sunil Hebbalkar

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Sunil Hebbalkar

Sunil Hebbalkar develops content for Algosonline, Market Size Forecasters, and a couple of other platforms. A Post graduate mechanical design engineer by qualification, he worked as an intern at the defense lab for one year in the engine design and development departm...

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