About a month ago I relocated to Sydney from my home base in New York. As you’d expect of a US consumer, I brought an Amazon gift card with me – a practical “going away” present from my family and friends, to help me get settled in my new apartment.
When Amazon launched in the US in the late 90’s, the shopping experience changed completely; it’s far more common for movers to shop online for their homeware, instead of visiting the local storefront. This all got me wondering about Amazon’s recent play at the Australian markets, and whether they can reshape buyers’ experiences in Asia Pacific like they did in the US.
Philip Schretzmeyer, Head of Treasury and Group Planning at Charter Hall had some thoughts around the extent to which Amazon could disrupt the Aussie markets. Charter Hall manages US$20.4 billion in properties across the globe and touches key commercial sectors in Australia, which means that Charter Hall can claim a stake in an Amazon success (more on that below).
I caught Schretzmeyer’s panel discussion at the recent Private Placement Industry Forum in Miami, where he addressed the question on the top of everyone’s minds: How big will the Amazon disruption be in Australia?
Competition with brick and mortar (B&M) retail
In his analysis, Schretzmeyer says that Amazon will definitely drive competition between local storefronts and online retail (with online retail capturing market share). The obvious factors: shipping speed and product prices. Reports show that storefronts are adapting to the competition; JB Hi-Fi now offers same-day delivery, and three-hour rush services. Amazon also tried to level the playing field by opening its warehouse and distribution network to smaller, local, third-party businesses, which might not have the scale to build their own shipping networks.
Increased investor demand for industrial leasing property
According to the panel, compared to B&M business, e-commerce typically takes up 3x the physical space to package online orders. To commercial real estate asset managers like Charter House, this means that since Amazon, which is in the market for warehouse leasing property, there has been a climb in investor appetite for industrial leasing property. Australia has a lot of land available for new real estate, which means local tenants will not go dark, according to Schretzmeyer.
Some industries will be impacted more than others (electronics, media/sports, and outdoors)
From a product perspective, certain retail sectors will be impacted more than others if Amazon is successful. Schretzmeyer mentioned that total growth in retail sales is trending at 4% (across food, apparel, homeware, bulky goods, leisure, retail services); there is a -0.5% impact from online retail. Amazon’s presence is expected to drive competition in electronics, media/sports and outdoors sectors, while the food industry won’t be as deeply impacted.
We’d like to hear your thoughts around how the Australian Amazon launch is affecting your business – if at all. Feel free to contact us here.
Oh, and about my Amazon gift card? I haven’t decided what to order with it yet. Maybe I’ll just save it for a rainy day…