Citi: Amazon expected to launch in October

Amazon logoSupplier feedback across retail categories points towards a pre-Christmas launch for the American e-commerce giant Down Under, suggesting that a formal launch will occur sometime in October, according to Citi analysts.

Food and liquor are among the categories expected to be impacted most immediately by Amazon’s imminent entry, with margin pressures expected to arise from a competitive response in the pre-Christmas sales period.

Sister publication Inside Retail revealed last month that local fresh supplier Dandy Fresh, which is located across the road from Amazon’s Melbourne fulfilment centre, has approached the ecommerce giant about a possible fresh-food supply deal.

“Amazon is likely to maintain a strategy of matching or being the lowest price in the market at all times. This could spark a response from incumbent retailers who are intent on not being beaten by Amazon on price during the key pre-Christmas sales event. In our view, lower pricing will likely be the result of Amazon’s lower margin and ROI expectations, particularly in the short term,” Citi analysts Bryan Raymond and Craig Woolford said.

They forecast the incremental 2Q18 impact of Amazon’s entry to be $200 million or 0.2 per cent of total Australian retail sales. Citi anticipates the launch to occur ahead of the Black Friday sales event on 24 November, with free delivery over a value threshold offered from day one. However, Raymond and Woolford don’t expect Prime to be part of Amazon’s initial offer, they expect that service will be launched to coincide with Prime Day in July 2018.

“Amazon will be buying directly from leading suppliers, holding inventory and setting retail prices. Buying terms have been set and first orders have been placed with suppliers in recent weeks,” they said.

Interestingly, Citi reckon that Amazon marketplace is a “secondary focus” to its own retail operation, which runs contrary to the giant’s commentary so far.

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