This post was originally published on Sydney Morning Herald.
But it did deliver one thing – a false sense of security that its rivals are safe, and so are their shareholders.
After all the fear and anticipation of the past year, shares in many listed Australian retailers rose on Amazon’s launch day, and some, such as JB Hi Fi and Harvey Norman, actually soared more than 6 per cent.
Even the beleaguered Myer share price moved up, while Super Retail Group and Premier Investments, experienced solid gains.
Certainly there was some rationale in the view that Amazon was not going to be the Grinch this Christmas.
But for investors looking for anything but a short-term trade, this response is way too premature. The market took a bit of a reality check on Wednesday, with retail stock prices generally drifting lower again.
There is no doubt that Amazon appears to have stuffed up its entry. Australia may be a distant location and fairly late to the game of online retail, but consumers understand value and are well practised on comparing price and range.
There was a tangible expectation – yes, in large part created by the media – that Amazon would take cheap to a whole new level in Australia.
But except for a few high-profile items, that didn’t happen.
Social media delivered its verdict – ripped off!
If you live in Australia and you want to pay almost double for any product this Christmas? then just head on over to #AmazonAustralia Where reasonable prices are a myth.
— Chris (@Zarekien) December 6, 2017
But let’s wait and see how long this reprieve will last.
Amazon boss Jeff Bezos didn’t build a company selling US$136 billion of goods and services by getting the customer offer wrong.
While most goods on the Amazon Australia website did not offer big discounts and some were actually more expensive than could be found in competitors’ bricks and mortar stores (the kindle in Officeworks being the most quoted example) there were a couple of big items that were seriously discounted, like the Xbox and Lego Star Wars sets.
So Australians did get a taste of the chunky discounts that Amazon has become so famous for. That also gave competitors a taste of the depth of discounting that they might need to worry about down the track.
For its part, Amazon has labelled the Australian launch as a big success, claiming its day one orders in this market were bigger than in any other in its history.
Analysts from investment bank Morgan Stanley crunched the numbers and found electronic items listed on Amazon are around 13 per cent more expensive than existing retailers, while apparel and sporting goods roughly match local prices.
A more concerning harbinger for the likes of Coles, Woolworths and Aldi is that dry groceries are on average 13 per cent cheaper on Amazon than at the local supermarket giants, according to Morgan Stanley.
Indeed, the Amazon Australia launch feels more like a testing of the waters. There were plenty of items with no stock or only left in stock, so inventory was pretty thin.
There is nothing stopping Amazon from adding to its range or reducing prices.
If Amazon decides to get more aggressive to win favour with Australian shoppers, then it could cause serious carnage.
The launch next year of stage two – Amazon Prime – will ratchet its range and competitiveness.
This is certainly the view of Citi analysts that told clients “the fundamental near term and long term outlook for retail stocks under coverage is unchanged post-launch. Retailer earnings will not be impacted until Amazon’s distribution centre network facilitates Amazon Prime and FBA (fulfillment by Amazon), expected in FY19e.”
Citi said “the range of brands and categories in electronics is unlikely to be disruptive to JB Hi-Fi and Harvey Norman in the near term. Big W, Target and Kmart are relatively more exposed given the stronger 1P (first party) presence in toys, beauty and basic apparel.”
The reality is that unpopular as this week’s Amazon launch may have been, the online behemoth will ultimately eat into retailers’ margins and revenue.
And when the famous Amazon supply chain and logistics are at full strength – which admittedly could take a while – it will damage competitors without a strong service offering, and acceptable inventory, and fast delivery times.
The verdict from the analysts is that the global e-commerce giant is only getting started.
For this year though, Amazon won’t kill Christmas for its competitors. Weak consumer spending probably will take care of that.
This post was originally published on the Sydney Morning Herald.