uploads/2017/06/a4.jpg

Amazon Is Expected to Control 25% of Australian Online Retail

By

Updated

At least 90% of homes have Internet connections

In April 2017, Amazon (AMZN) announced that it would be expanding its retail operations into Australia, but it didn’t say exactly when it would launch in the country.

Australia could be a huge growth opportunity for Amazon, considering that 80.0% of the country’s population lives in cities and that more than 90.0% of its households have home Internet connections.

Analysts at Macquarie Group predict that the company could control 25% of the Australian Internet retail market by 2025. Perhaps the greatest reason for Amazon’s potential in Australia is that only a tiny fraction of the country’s retail business has moved online. 

Research company eMarketer estimates that retail e-commerce accounts for less than 5.0% of Australia’s total retail sales. In places such as the United States (SPY) and the United Kingdom, Internet sales account for ~10.0% of the total retail industry.

Article continues below advertisement

Australia’s online retail market is gradually growing

In 2013, retail e-commerce sales in Australia were estimated to be $8.0 billion, or 3.6% of total retail sales, according to eMarketer. By 2018, Australia’s total retail sales are expected to hit $260.5 billion, with e-commerce contributing 5.6%, or ~$14.5 billion.

The chart above shows Australia’s estimated and projected retail e-commerce sales.

No peace for Australian retailers

Amazon’s entry into the Australian market is expected to rattle incumbents such as Harvey Norman Holdings, Myer Holdings, Wesfarmers, and JB Hi-Fi. Shares of some of these retailers slumped following Amazon’s announcement of its planned expansion into Australia.

Australia provides another opportunity for Amazon to deploy the retail strategies that have helped it against domestic rivals such as Walmart (WMT), Best Buy (BBY), Target (TGT), and Macy’s (M).

Advertisement

More From Market Realist