Amazon: On your marks, get set…

Amazon fulfillment centreAll eyes have been on Amazon, since the e-commerce giant last week told local Marketplace sellers that it would begin testing the site internally on Thursday, November 23 at 2pm AEST.

But while Amazon employees themselves have been placing orders to check sellers’ software integrations and fulfilment times, according to one seller who wished to remain anonymous, the ‘Everything Store’ is still not open to the public in Australia. 

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As of 27 November, Amazon had not provided any further details about its launch Down Under beyond broad statements made by local country manager, Rocco Braeuniger, and Marketplace boss, Fabio Bertola, at the Marketplace Seller Summit about three weeks ago.

At the event held in Sydney on 13 November, Braeuniger revealed Amazon was “really, really, really close” to launching, and Bertola claimed hundreds of sellers were ready to go, having uploaded product listings in Seller Central, set prices and shipping times and allocated stock.

These comments bolstered the consensus among many industry analysts that Amazon would launch on or before 24 November to take advantage of Black Friday shopping. But while that has now been proven wrong, Citi analyst Bryan Raymond tells IRW he still expects Amazon to launch this week. 

According to Raymond, the e-commerce giant was “pretty firm” with suppliers about its intention to launch before Christmas. Some suppliers have shipped stock to Amazon’s warehouse in Dandenong South, where a sign placed in the car park earlier this month welcomed employees to work, while “a whole bunch of distributors” are currently holding stock for the Amazon.

Meanwhile, IRW has spoken to several major brands and retailers that will be on Amazon Marketplace when it launches, including Mitch Dowd, Bendon Lingerie, Matt Blatt, Styletread and Costumes.com.au. Together, they have listed thousands of products on the site, and at least one has fulfilled a test order since Thursday.

Winners and losers

Chief executive of Mitch Dowd, Dane Totham, says the brand will offer its full range of men’s, women’s and kids’ underwear, sleepwear and socks on Amazon when it launches in Australia.

Currently, Mitch Dowd products are primarily sold through the major department and discount department stores in Australia, but these retailers typically stock a tiny portion of the entire range.

Totham believes the future lies in direct-to-consumer channels that give shoppers more choice. The brand also has an online store and sells through marketplaces like Ebay and The Iconic.

“It’s where consumers are moving more to. You need to be where consumers are,” he says.

Totham is unsentimental about what this shift means for the department store retailers that currently stock Mitch Dowd products, though he doesn’t believe it’s necessarily a death knell.

“Change is inevitable. Embrace it and get on with it,” he says.

But a source who works at a major multi-brand fashion company that has signed up to sell on Amazon believes the ecommerce giant will create winners and losers in Australia’s retail sector.

“We’re in the lucky position that we’re in a vertical market…[Amazon] will be good for us” the source tells IRW. “But it may be difficult for some retailers that are not vertical and are on-selling other brands.”

Retail analysts at UBS and Citi have both suggested that electronics, fashion, sporting goods and toy retailers are the most vulnerable to Amazon, while the hardware, auto and grocery categories are likely to be least impacted in the short-term. Online marketplaces like Ebay and Catch may also suffer in the short-term.

But almost everyone agrees that Amazon’s true impact will not be felt immediately. A report from UBS predicts the e-commerce giant will steal just two per cent of retail sales within five years of entering Australia, growing revenues from more than $400 million to about $3.5 billion by 2023.

Avoiding the pitfalls

But even the brands and retailers that have decided to join Amazon Marketplace from the start are proceeding with caution, given the company’s reputation for competing directly with third-party sellers.

Lee Munro, managing director of online shoe retailer Styletread, tells IRW that the possibility of competing with Amazon is “definitely on our radar and something we have to be mindful of”.

“With Zappos, Amazon is one of the biggest shoe companies in the world. We’re very mindful of what they’re doing.”

Styletread has used the marketplace integrator Commerce Connect from Fusion Factory to automate the process of loading its entire inventory – around 6,000 products – on Amazon.


Munro says the team is still working on optimising the listings to ensure orders made through Marketplace sync up with Styletread’s ERP and fulfilment systems.

Nathan Huppatz, founder of Costumes.com.au, says these integrations are crucial because of Amazon’s strict performance requirements.

“If you have issues where you oversell, or shipping doesn’t happen quickly, your seller performance may drop below a certain level and it can impact your account, or your account can be cancelled,” he tells IRW.

Costumes.com.au used a different integration tool, M2E from Magento, to automate the creation of its product listings.

“We’ve got a bunch of items loaded already and we’ll work towards having a large range on their over the coming weeks,” Huppatz says.

Meanwhile, Matt Blatt has listed about 25 per cent of its inventory on Amazon Marketplace, with a focus on trialling bigger items, such as furniture, rather than smaller goods like pillows, according to general manager Joel Drexler.

“[The process] was pretty similar to eBay…our product information feeds directly into their website. There was minimal time and effort involved, and it gets our brand out there in front of a whole new audience,” Drexler says.  

New customers

Indeed, the opportunity to reach new customers is the main reason hundreds of Australian brands and retailers will ultimately decide to sell through Amazon. According to a survey released by UBS last week, 51 per cent of shoppers say they will likely make a purchase on the platform.

The UBS Evidence Lab research, based on responses from 1,008 Australians, found that 56 per cent of shoppers are likely to at least visit the website, with competitive prices, the prospect of improved delivery and a wide range of products emerging as key factors driving consumer interest.

UBS analyst Ben Gilbert said the hype around Amazon’s entry alongside the market fundamentals that justified the ecommerce giant’s decision to open locally mean that it’s likely Amazon’s launch will be successful, accelerating growth in online penetration.

“Our shopper data suggest [Amazon’s] full entry will result in more educated shoppers, forcing incumbent retailers to become sharper in their pricing and service offering both in store and online,” he said.

 

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