No one can deny the dominance of Amazon in its market of origin. Boasting nearly 60% of all online eCommerce sales in the US, retail brands are practically invisible online if they are not featured on Amazon. So dominant has Amazon become, that 74% of U.S. consumers now begin their product search on the Amazon.com site (according to the 2021 Amazon Advertising Report). And more than 56% of consumers say that if they were only able to buy products from a single store, it would be Amazon.
From little things big things grow
In Australia, Amazon’s dominance in the eCommerce space is far less pronounced – largely in part due to its entry into the market only five short years ago. But there is no doubt that the sleeping giant's growth is gathering pace and it has many major players including the likes of Wesfarmers on the edge of their seats.
When Amazon first entered the eCommerce market 5 years ago, the marketplace featured a fairly underwhelming range and breadth of categories – launching with 7.5m items across 23 categories. Fast forward to today and it appears that Amazon has doubled its distribution capacity this year to more than 330,000 square metres, and expanded its product range by 60%, to 200 million items across 31 categories.
According to data published by the AFR- it isn’t just Amazon’s range and distribution capacity that are growing rapidly. Analysts believe Amazon’s Australian sales are still growing by double digits, despite a slow down in omni-channel and eCommerce retailing. It is believed that Amazon’s gross merchandise value, which includes sales from third-party sellers, is estimated to be as high as $2.6 billion. That's already two or three times that of local marketplaces Kogan.com and Catch, with Amazon on the cusp of overtaking eBay as Australia’s number one trafficked eCommerce retail site in the next 12 months.
And if their distribution capacity is anything to go by- it appears that Amazon is not done yet. Analysts believe its new fulfillment centre provides capacity to service retail gross merchandise volume (GMV) of 6 -7 billion. It is also believed Amazon is actively looking to set up a distribution centre in Victoria, to further boost distribution and enable free one day delivery.
Primed for success
With an estimated one third of Australian households now having access to Amazon Prime, which entrenches repeat purchase behaviour and engenders loyalty, there is little doubt that Amazon is well positioned to leverage this to power its future growth ambitions.
The scale of prime membership and the lure of one day delivery in Melbourne and Sydney is forcing other marketplaces to up their game. In December 2022, Wesfarmers announced OnePass had teamed up with Disney+ to provide subscribers with a SVOD offering. This would augment its delivery proposition to compete with Amazon Prime - which bundles delivery with streaming and other benefits for one low price. Whether or not it will be enough to lock customers into the Wesfarmers network and sway consumers to choose its digital properties first to buy will be one to watch closely.
Looking ahead
Amazon Australia are still very tight lipped about their future plans. One of the big questions on the minds of supermarkets and FMCG brands alike is whether they will make a move into the fresh and grocery space, as they have in other key markets around the world. Doing so will further accelerate Amazon as the destination for Australians to shop for their everyday items and broader retail purchases, in turn making it harder for the likes of a Wesfarmers and Woolworths to compete in the battle for audiences and share of eCommerce retail spend.
For brands who are yet to experiment with Amazon, 2023 is the year to begin to test, experiment and grow your Amazon strategy or be left behind. With 14,000 sellers already on the platform and growth accelerating, brands are at risk of becoming invisible online in Australia if they are not featured on Amazon. >> Find out more about our eCommerce & Digital Sales Growth Services Photo by Christian Wiediger on Unsplash