Amazon and Australia

1. ARE THE BARBARIANS AT THE GATE?
I
had other themes for this opinion editorial for
MHD, but the noise around “Amazon coming
to Australia” is getting louder. Really loud.
So I have opted to pen some notes based on a
LinkedIn piece I posted some months ago and,
since then, the numerous ‘sound bite’ interviews
I have done for TV and mainstream media.
I really think it is time to pen a more
comprehensive and thoughtful piece on the
plans of the mighty Amazon. And where better
than MHD! So thank you for the opportunity
and thanks for reading.
First point, is Amazon coming to Australia?
Let’s be clear, Amazon as a business is
here already, in a big way. Estimates show
between $500 million to as much as a billion
dollars’ worth of goods are being shipped into
Australia by Amazon. Mainly books, fashion,
media, and digital product. Nothing with a
plug (compliance issues) and nothing big or
oversized (issues of value density). Added to
this, we now accept that Amazon is way more
than a ‘retailer’. For example, the Amazon
Web Services business is well and truly on the
ground here and making major inroads. Also
its online marketplace business is one of the
jewels in the crown, and very active trying to
get Australian retailers to sell globally.
The question we are really asking: is Amazon
going to build warehouses and distribution
here, and roll out the successful Amazon
Prime and Amazon Fresh businesses around
Australia? There is a lot of speculation in the
media, usually from industry pundits (and I
recognize I am one of them). But we all have
to concede that none of us have proof. Until
we receive an official Amazon announcement,
we are all tapping into our network and getting
differing views.
My intel (from what I consider a reputable
source) is ‘no time soon.’ I am of course hearing
alternative views. My views are based on both
industry sources as well as reading extensively on
Amazon plans. So, my view is, ‘don’t hold your
breath. No time soon’. With Amazon currently in
deep engagement and investment in India, you
would guess that Australia, a good market that it
is, is still well down the priority matrix, especially
with Amazon’s less capital-intensive activities
growing very well indeed locally.
As we know, Australia, with its enormous
land mass and small population, is not that
perfect a match to the high-density scale-based
supply chain systems of Amazon, which are
ubiquitous in the USA and Europe. Indeed, our
own community of online retailers in Australia
is struggling to get the financials to stack up,
with hard shipping and logistics costs versus
customer expectations far apart. In the short
term, don’t expect Amazon to solve the problem.
Sure, it doesn’t always focus on profitability as
a core metric of success, but it is highly tactical
and strategic and certainly picks its battles well.
There is one development that might prompt
Amazon to ‘come over the fence’ and set up
shop here sooner. And that is the pending
application of the lower value threshold tax due
to commence in July 2017. Loosely named
the “Amazon tax”, the government is talking to
large e-tailers like Amazon and ASOS with the
mandate that they collect GST from Australian
shoppers and remit to the ATO, with the tax-free
threshold going from $1,000 to zero.
Sounds fair? Well, not really sure if the
‘taxation equity’ arguments stack up. This
conversation is probably for another column,
but in short, Australian established retailers
who have lobbied the government hard for the
levying of the GST at source, (Amazon tax),
might rue their strategy if it unleashes the beast
in Amazon and it comes clambering over the
fence. As the old saying goes, “be careful what
you wish for, you might just get it!”
And lastly, if it does come, will it “eat our
lunch, breakfast and dinner” as the chairman
of one of Australia’s largest retailers exclaimed
recently? I think not. The tide we know can
raise all boats, and a mega Amazon investment
into Australia, especially their FBA, (Fulfilment
by Amazon) service, might just be what we
need to connect the dots and make life easier
for shoppers and merchants. The ‘frenemy’
model has proven itself time and time again in
Australian logistics and supply chain.
In summary, my view is that Australia is deep
in the “too hard basket” for Amazon retail, for
now. I might be wrong, but the current media
hype just doesn’t stack up for me. Which is why
I seem to be getting such short media grabs,
especially on TV. Perhaps, with respect, I am
not telling them what they want to hear?
Paul Greenberg is the founder and executive
director of NORA.org.au.
AMAZON INSIGHTS
Amazon's Robostow.
PAUL GREENBERG
MHD SUPPLY CHAIN SOLUTIONS — JANUARY / FEBRUARY 2017
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