Guest post by Callum Mundine from OneEgg
Amazon is a huge marketplace that has changed the way companies sell and connect with customers. With Amazon penetrating the Australian market, the business community raised the alarm that brick and mortar stores will suffer.
However, that does not seem to be the case. With Amazon Australia turning one year, it is clear that there is no reason to worry. Although the Australian economy is the 12th largest in the world, not many people choose to buy online.
In fact, Amazon sales have shown to amount to only a small portion of the overall sales of various brands. Moreover, according to Reuters customers are much more likely to look for an online store of their preferred brick and mortar businesses, than they are to turn to Amazon for help.
But what does this mean for your business? Should you launch a new product on Amazon and try to benefit from being among the first to enter, or should you wait to see how the marketplace develops further? Let’s look at five areas to help you decide what’s the best thing to do in your particular case is.
1. Amazon Australia is Different Than Other Amazon Regional Marketplaces
The first thing to note is that although Amazon Australia looks just like any other Amazon marketplace, it has a couple of core differences.
Amazon Prime delivery not being available in Australia was one of those differences in the very beginning – but that difference disappeared once Amazon launched Prime in mid-2018.
However, wishlists, which are a core functionality of other Amazon marketplaces, are not available in Australia. And according to information that Lifehacker obtained from an Amazon spokesperson, wishlists are not planned any time soon.
And lastly, the number of listings on Amazon.com.au has to be mentioned – as it is tiny compared to other Amazon marketplaces.
2. Australia is a New and Unknown Marketplace for Amazon
Bearing all of the above points in mind, it is clear that Australia is an uncharted region on the Amazon map. In fact, Amazon Australia covers a mere 0.5% of the total Amazon market share.
That does not mean that Amazon will not develop as time passes – it just means that they have not penetrated the Australian market just yet.
For any company looking to list their products on Amazon Australia, this is clearly a double edge sword. On the one hand, most of the big players on the global Amazon stage take the largest share of the pie because of one defining factor: they have been among the first ones to enter.
The lack of products and development of the current marketplace means that your brand will face low barriers to entry and insignificant competition. If the marketplace develops (and it probably will, it’s Amazon after all), you will be on the winning side.
On the other side, however, the fact that people are still used to buying from their favourite brick and mortar brands, means that they are not frequent visitors of Amazon. So, if you are planning for Amazon to be your only sales channel, you would be better off if you consider other ways to place your products as well.
3. Amazon Can Be Slow and Expensive
Another particular thing about Amazon Australia is the shipping. Australian geography is far from accommodating for online retailers that promise fast and reliable shipping.
Being the country with the most spread-out population (among developed countries, that is to say), with little inland transportation available, poses a severe challenge.
Moreover, because of the country’s location, shipping from Europe or USA can be very expensive.
There is a way to go around this, of course, and that is Amazon’s Fulfilment which allows for third-party vendors to ship a variety of products in bulk and store them in Amazon’s central warehouse. From there, Amazon themselves will take care of the delivery across the country.
Fulfilment is a good option, but needless to say, it comes with a couple of downsides as well.
First of all, Fulfilment is not free, so Amazon is storing and delivering your products in exchange for a small fee. This would not be a problem at all, if the second issue did not exist: you will need to remove or liquidate the inventory you hold in Amazon’s warehouse for 6+ months. And this, as you would expect, can cost you a lot, as wages and logistics are not cheap in Australia.
4. Amazon Australia’s Prices are Insane
Many of the product prices on Amazon Australia are much higher than on Amazon US. People are not happy about it and have been having a number of online discussions on this topic.
Many times, it is cheaper to order a product from the US (shipping fees included), and wait for it to be delivered in Australia than to order locally.
This works against Amazon’s marketplace in Australia, slowing down its development. Part of the problem lies in the 10% GAT (Goods and Services Tax), which is included in the sale price.
5. Let’s Not Forget About the Housing Bubble
Currently, the Australian economy is strong and blooming. And, when the economy is strong and people have high incomes, they are more than happy to spend extra money shopping – both in physical stores and online.
However, this scenario might change significantly in the near future.
The Australian property bubble has been the talk of the town for some time now, and in the past couple of months, it has caused some worry.
When it comes to the stabilisation of asset bubbles, there are two options: the bubble might burst, and cause dramatic damage to the local and global economy, or the bubble might deflate and stabilize slowly.
With property prices in Sydney and Melbourne declining at an accelerated rate, experts are afraid that the Australian housing boom is not heading for a soft landing.
So, it cannot be said with certainty if, in the near future, people in Australia will be willing to spend as much money as they now are.
The Verdict
Amazon is a huge name on a global scale, and its marketplaces are bound for nothing but growth.
However, the particularity of the Australian marketplace, caused by the uniqueness of the country’s geography, and the Aussie’s habits to buy in physical stores, and from brands, they already know and trust, makes Amazon Australia an anomaly when compared to other regional Amazon marketplaces.
The low start of the marketplace offers an opportunity to enter the marketplace before it gets crowded and ensure that you get one of the biggest shares of the pie once it develops further.
And, since it is Amazon we are talking about, the question is not whether it will develop, but when and how.
Having said that, it might not be a smart move for companies to rely solely on Amazon for distributing their products to Aussie buyers.
Amazon Australia can be a great asset to existing businesses in Australia who are looking to create an additional sales channel.
However, for businesses based overseas, selling on Amazon Australia can be complicated, expensive, and disappointing in terms of profit.
Related: How to Sell on Amazon Australia
