Amazon...

Dow
n undah
Not if, but when...

eat our
breakfast,
lunch, and
dinner

-Wesfarmers group managing director Richard Goyder

Why
Australia
?

Australian Retail Industry

Consumer retail

Online shopping

Australian Retail Industry:

Life Cycle

Lo
w of
Threat

Porters Five Forces - substitute

products
Australian Retail Industry

Suppliers and wholesalers

are caught in exclusivity
agreements with the
retail duopoly. Suppliers
have few options for
getting their products to
consumers.

LO
W
Bargaining
power of
suppliers

The nature of the Australian retail market

favors duopolies (grocery, electronics, etc)
and it's only when a third entry enters that
rivalry increases.

Mediu
m
Rivalry

within the
industry

For the independent

business owner, student,
etc they need certain
products in their lives
and there are few
substitutes for those
particular products. For
example you would not
replace a laptop with a
calculator and notepad

Hig
h
Bargaining
power of
Customers

Most products are

undifferentiated or
standardized. Lack of a
USP/value proposition in the
product portfolios of the retail
players is also seen.
So price sensitivity is a major
determinant of consumer
behaviour

Hig
Threat
h of
new
entrants

Barriers to entry is relatively low given the

enhanced market openness through regulatory
reform (e.g., cutting tariff rates and corporate
taxes).

This is
how we
roll...

Start with the customer and

work backwards

SWOT Analysis of Amazon in

Australia
Strengths
-economies of
scale
-expertise in
supply chain
-product variety
-long-term
horizon model
-comfortable
making capital
intensive
investments
-comfortable
operating at a
loss
-customer
centric
-supplier
relationships
-brand
awareness

Weaknesses
-negative
publicity: Bezos
-local brand
affinity /
customer
relationships
-employee
relations
-lack of
infrastructure in
logistics

Amazons Logistics Superiority

- 342 Global Facilities (FC, Sortations, DS, PNH)
- Fullfillment Centers
- Average about 500,00 Square Feet
- Typically located within 20 miles of population hubs
- Typically located near 50%+ of ideal income bracket for same day delivery
($50,000+ USD)

- Sortations
- Nearer to Cities
- Half the size of FCs

Amazons Logistics Superiority

- Delivery Stations
- Same Day deliveries
- near airports
- Smaller in size - 50,000 Square Feet
- Amazon run delivery

- Prime Now Hubs

- In urban locations, downtown, etc
- Small stock of 10,000 of top items
- Pantry, Fresh and Prime operated from these locations
-

Amazons Logistics Fulfillment

Amazon acts as a warehouse, logistics and shipping partner to
thousands of third party individuals
- 40% of Amazon business is third party
- A portion of warehouses and fulfillment centers is reserved for third
party

Sellers send their goods to Amazons fulfillment centers and pay

a fee to market, warehouse, pick, pack, and ship their products.

- Gives consumer more options and better prices

Where
are we
now?

Amazon.com.au

Amazon in Australia - Today

$500-$700m ON AMAZON.COM
Australians are paying
shipping fees on US site

Category share estimate

Limited product
availability for Australian
shipment

Source: Citi Research Estimates

25% of Australias $16.6bn online

retail is international

We are
going to
destroy
the retail
environm
ent in
australia.

Amazon Australias Growth spider

Market Attractiveness

New Products - growth

opportunities
Build
Prime
Competen
cy

Target

De-Select

Opportuni
stic
Pursuit

Ability to Compete

Amazons Reach

Value Chain - growth

Build
Prime
opportunities
Competen
Target
Return on Investment

cy

De-Select

Opportuni
stic
Pursuit

Ability to Compete

Proposed
Value Chain

3rd Party
Fulfillment

Easy Ship
Normal
Delivery
Amazon
Flex
In-Store Pickup

Amazon...Dow
n undah

Not if, but when...

Appendix

Horizon II: AmazonFResh

17.2% of the $18.0bn online retail industry
Online grocery sales are expected to double by 2020
Average online shopping basket in Australia is 3 times the value of instore equivalent
Current competitors: Coles, Woolies, Shopwings, Your Grocer

Horizon III: GLOBAL SUPPLY

CHAIN
(PROJECT DRAGON BOAT)
National logistics network
- Fulfilment for 3rd parties
The other 30%; Regional AU
- Mobile pre-stocked trucks
- Self-driving trucks
- Amazon Prime Air (drones)
Share of family wallet

Current product offerings:

Amazon will begin expanding its boundaries into Australia by leverage
pre-existing assets and avoiding high fixed costs:
1.Ebook market
Amazon captured 95 % of the UK e-book market
Amazon already has ~70% of the Australian e-book market
Amazons 1990s slogan was Earths largest bookstore
Growth phase: Australias ebook market has a AUD$116 million
market cap, with nearly 15% annual growth rate

Market Entry Strategy: horizon

IE-books

New
Products

Similarities of eCommerce Markets

in UK and Australia
Taste in Products similar
Similar Culture and customer values

Growth in Amazons Product Base in

UK

Books,
Music
and
Movies

Electronic
s and
Marketpla
ce Model

Luxury
products
and
Amazon
Prime

Office
Supplies
Store and
Kindle

Kindle and
Amazon
Lockers

Value
chain

Similarities of eCommerce
Markets in India and Australia
eCommerce most strong in big cities because of Internet
Savvy customer base living in very dense areas
Presence of many small suppliers and wholesalers who are
not selling on the Internet
Logistic infrastructure not on par with that of USA
Delivery Systems concentrated in cities
eBay targeting these independent suppliers

Amazon IndiaFirst Steps

A online shopping
service enabling
customers to find
products from online
and offline retailers
How Junglee Progressed
Comparison-shopping
website
A single window
marketplace by making
every item from every
supplier available for
purchase

Marketplace model well

received in Indian
market by strong efforts
of early entrants (eBay,
Flipkart etc.) and

SuppliersBuild
Awareness
Went for
Suppliers through
the Chai Cart
Initiative
The Chai Cart
teamtraveled
across 31 cities
Engaged with
more than 10,000
sellers.

SuppliersBuild
Registration

Amazon Tatkal, a
self-described
studio on
wheels
provides a suite
of launch
servicesregistration,
imaging,
cataloging, and
sales training.

Build
Fulfillment
Centres

Copied the model

of Fulfillment by
Amazon (FBA) in
USA, to store and
distribute the
products it sells.
Sellers send their
goods to Amazons
fulfillment centers
and pay a fee for
the corporation to
store, pick, pack,
and ship their
wares.
built nearly two
dozen warehouses

Neighbourho
od Logistics
Easy Ship
Amazon couriers
pick up packaged
goods from a
sellers place of
business and
deliver them to
consumers.

Neighbourhoo
d Logistics
Seller Flex
vendors designate
a section of their
own warehouses
for products to be
sold on
Amazon.in, and
Amazon
coordinates the
delivery logistics.

Last Mile
ConnectivityStore Pick up
Started Amazon
Neighborhood
depots where
customers can
pickup purchases.
It haslaunched
pilot program in tieup with Bharat
Petroleum, which
has a retail store, In
& Out, at all its
filling stations in
India

Last Mile
ConnectivityMotorcyclists
it utilizes bicycle and
motorbike couriers for
last-mile deliveries in
both urban and rural
communities
Save costs and time
by hiring these
couriers as it is easy
to navigate urban
areas and find easy
parking relative to
trucks and vans as
delivery.
Model similar to
followed by UberEats
and Deliveroo in
Australia.

iv
pt

)
t(s
n
be y
m
u tor
c
n
I
jec
a
r
t

High endBig
Businesses
market

E
tr ntr
aj an
ec t
t o di
ry sru

Product / Service Performance

How Amazon is
disrupting the Office
Supplies Market in US

Time

MainstreamSmall
businesses
and premium
consumer
market
Low endNormal
Consumer
market

Minimum Entry for Maximum

Saturation
Australia is unique to countries Amazon is already operating in
70% of Australian Population is located in cities of 100K+
Sydney, Melbourne, Brisbane, Perth, Adelaide, Gold Coast, Newcastle, Canberra, Sunshine Coast, Wollongoong, Hobart,
Geelong, Townsville, Cairns, Darwin, Toowoomba.
-

A shift from large fulfillment centers to smaller facilities, hubs, will quickly saturate the Australian market.
1 Fulfillment Center at Port Botany
5 Sortations One between Sydney and Newcastle
One south of Sydney between Wollongoong and Canberra
One around Brisbane servicing Gold Coast, Sunshine Coast and Woowoomba
One servicing Cairns and Townsville
One servicing Melbourne and Geelong
8 Delivery Hubs in Sydney, Melbourne, Brisbane, Perth, Adelaide, Cairns, Canberra and Hobart
7 Prime Now Hubs in Sydney, Melbourne, Perth, Brisbane, Adelaide, Cairns, and Canberra

PESTEL ANALYSIS
Political/Legal
The Australian Retailers Association (ARA) has been
encouraging, promoting and protecting retailers by providing
education,support and mentoring for the past 100 years. The
Federal, State and Local Governments regularly seek the
opinions and views of the ARA when they undertake new
projects, act to change existing law or implement new
legislations.

Economic
Low national rate of saving, low household rate of saving
Falling house prices
High oil prices and it continues to rise.

 SOCIO-CULTURAL SEGMENT
The number of people living alone is projected to increase from
1.8million in 2001 to between 2.8million and 3.7million in 2026
due to ageing population, delayed marriage and increases in
divorce and separation. This would create a demand for more
household items such as furniture, kitchenware, and gardening
items etc.
Australia is a multicultural society. After World War II there was
heavy migration from Europe, especially from Greece, Italy,
Germany, the Netherlands, Yugoslavia,Lebanon, and Turkey.
Currently there is a heavy migration from the South Asian and
South East Asian Countries as well.

Economic environment
Technological
New Communication Technologies: The Internet and ecommerce have boosted the international competitiveness of
Australian businesses. Many Australian firms are now using
internet technology to expand into new foreign markets. With
the introduction of NBN in Australia it will be well connected,
both domestically and internationally, with a modern fiber-optic
backbone, satellite coverage and an extensive mobile network.
Ecological
Australia is one of the most urbanized and coast-dwelling
populations in the world. More than 80 per cent of Australians live
within 100 kilometres of the coast. (Department of Foreign Affairs
and Trade, n.d.).

Market Structure analysis:

office
supplies
Endogenous demand
Moderate minimum-efficient scale (MES)
Differentiated oligopoly market structure
High fixed costs; high cost asymmetries
Low barriers to entry
Strategy for growth in this environment:
Segmentation; product mix; distribution channel
Maintain distance from competitors

Hurdles
Logistical Challenges of transporting goods across AU
Existing Retailers in the marketplace
Australias e-commerce challenges

Success/Goals
Ecommerce win and penetration
Online Streaming
Fresh Food/ Grocery marketplace
Entry into Cloud Space
Warehouse logistics

Market entry strategy: horizon

1
2. Web Services - Cloud Computing Services
Already has presence in Australia
3. Music/Video on Demand Streaming Services
5 main players; Amazon has yet to penetrate
High growth rate (15%)

Market Entry Strategy: horizon

IVideo Streaming