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Welcome to the jungle

Amazon is ruffling local feathers, and it's already paying off

December 2017

It's hard to read the business pages at the moment without coming across a story about Amazon's impending arrival in the Australian market.

Amazon hasn't said when it's opening shop or what services it will offer, but in countries like the US and UK it's an online marketplace for everything from groceries to electronics, backed up by free and fast delivery for people who are willing to pay for an Amazon Prime subscription.

Talking to consumers in the US and UK, it's the delivery that is a key differentiator – in some cases you can buy something online and have it delivered that evening.

Depending on which Australian commentators you believe, Amazon is going to either transform shopping for customers, destroy local businesses or be a complete flop. Whichever of these turns out to be true, what I find interesting is the way in which Australian businesses are already responding.

Myer has announced it's working on a new online marketplace – something that seems long overdue. The last time I shopped online with Myer, the products I bought took ages to arrive and were sourced from different stores, so arrived in multiple packages on different days. Hardly a world-class online shopping experience.

Woolworths says it's testing new delivery services – including one-hour delivery in major cities. Better than the three-hour delivery windows it's offered until now.

And it's not just the retailers. Australia Post has announced a new service called Shipster, which will provide free shipping on orders over $25 from affiliated retailers in return for an annual fee.

These are visible signs of the effect of competition, from businesses that have gotten away with poor online shopping and delivery services for years.

Competition is also expected to have an impact on price, with ACCC chair Rod Sims recently saying that Amazon will be able to undercut local retailers to win business. If this sounds a bit rough, he made the point that it's OK for Wesfarmers to do this when it opens a Coles store in a new town. The same rules apply to every business.

Sims also makes the point that online marketplaces like Amazon aren't all bad for local businesses. For smaller businesses that might struggle to get on shelves of major stores, they provide another way to reach customers.

I'm no Pollyanna about Amazon. It's a big, global business with enormous market power. We need to apply a critical eye to the way it enters the Australian market. But we have to be equally critical about any big Australian retailers who cry foul. They've been treating us poorly for years, so a little competition is no bad thing.

Alan Kirkland, CHOICE CEO
Email: alan@choice.com.au
Twitter: @AlanKirkland

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