Weekly Reports | Mar 08 2024
The threat to incumbents posed by Amazon Australia; the rally for Australian bank shares queried; flat 2024 house prices; and emerging signs of a potential boost for retail sales.
-Amazon Australia’s rising threat to incumbent retailers
-Citi questions the recent share price rally of Australian banks
-Flat 2024 house prices, residential construction to remain weak
-Fledgling signs of a stronger consumer to potentially boost retail sales
By Mark Woodruff
The threat posed by Amazon Australia to incumbents
Following the release of 2023 financials for Amazon Australia, Jarden suggests general merchandise retailers in Australia that rely on third-party brands are most at risk from the behemoth.
Falling into this danger category, according to the broker, are JB Hi-Fi ((JBH)), Kogan.com ((KGN)), Wesfarmers ((WES)) and Myer ((MYR)).
Considered less at risk are Accent Group ((AX1)), Temple & Webster ((TPW)), Premier Investments ((PMV)), Woolworths Group ((WOW)), Coles Group ((COL)) and Nick Scali ((NCK)).
In 2023, Amazon Australia expanded its Prime share, introduced Prime free same-day delivery, and announced its new 209,000sqm fully automated Craigieburn distribution centre in Melbourne, the second in Australia.
By the end of 2024, the analysts predict Amazon will take an around 8% share of incremental retail sales growth in Australia, led by growth across both food and the discretionary non-food space.
Amazon's market share will step-change higher, suggests Jarden, as shorter lead-times expand its addressable market and grow share of the customer’s wallet.
The rising risk for incumbents runs via lost sales and increased price competition, as shoppers are increasingly using Amazon as their first point of purchase.
The global e-commerce leader accounted for around 15% of non-food online sales in 2023, and Jarden forecasts an increase to circa 18% in FY24.
As sales will be harder to come by, and price competition will intensify, the analysts suggest more investment will be needed by existing players into loyalty, services and the supply chain.
To illustrate the current size of Amazon Australia, Jarden points out the company’s gross marketplace value (GMV) is now larger than the combination of Access Group, the Reject Shop ((TRS)), Beacon Lighting ((BLX)), Temple & Webster, Premier Investments and Universal Store ((UNI)).
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