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Welcome to the Jungle: What to expect from Amazon Australia

Amazon Australia is on the brink of launching, so should we expect big discounts or a retail apocalypse? Either way, the game is about to change.


Sarah Tew/CNET

Ahhh, Australia -- we're tech savvy, we invented Wi-Fi and the Hills Hoist, but we always seem to be invited late to the tech party. But all that's about to change.

Amazon is coming to Australia. And it's about bloody time.

According to a handful of reports, Amazon is preparing sellers who use its network for a soft launch in Australia on Thursday at 2 p.m. AEST. The launch will involve a "small number of customers," according to an email seen by CNET.

Amazon didn't respond to a request for comment. But the reports and email back up previous reports that Amazon would launch in time for Black Friday.

It's the right time for the company. Amazon has its eyes on the Asia-Pacific region, launching its Prime membership service in China and India in 2016. Success Down Under will help it fend off rivals like Chinese retail giant Alibaba and maintain its rank as the world's largest e-tailer.

But the Australian market comes with its own challenges. While we're geographically close in size to the US, we don't have the population density or the same distribution of big cities, which will make shipping a challenge. Amazon is starting out with one warehouse just outside Melbourne, but it will need to rely on existing logistics networks and delivery companies to get products to customers. Don't expect ubiquitous same-day delivery right off the bat.

Getting to know Amazon

Amazon offers everything from two-hour delivery to a button that you can press to instantly order laundry detergent. Here's the lowdown: The pure online retailer, selling everything from appliances and cameras to camping gear and vitamins.

Amazon Marketplace: Like eBay, Marketplace lets other retailers or small businesses sell their products online to Amazon's customer base. With Fulfillment by Amazon, sellers can also use the company's warehouse and delivery systems.

Amazon Prime: The popular subscription service, already well established in the US, that offers benefits like free two-day shipping for an annual $99 fee (US dollars), as well as access to special deals. In the US it also includes access to Prime Now two-hour delivery, and even the Dash button -- a physical button that lets you re-order everyday items like nappies or detergent.

Prime Video: Quietly launched in Australia at the end of 2016, Amazon Prime Video is a streaming service to rival Netflix and Stan. Amazon invests in its own originals through Amazon Studios, with shows like "Transparent" and "Man in the High Castle."

Amazon Music Unlimited: Amazon's ad-free music streaming service, complete with "tens of millions" of songs. Think Spotify or Apple Music.

Amazon Echo: Amazon's line of smart speakers was first launched in 2014 with the original Echo. That device has since been updated, shrunk into the Echo Dot and battery-powered Amazon Tap, and even turned into a smart camera in the form of the Echo Look. It's not the only hardware Amazon does -- Australia already has access to its lineup of Kindle eReaders, while customers in the US can also buy Amazon Fire tablets and the Fire TV digital media player.

Alexa: This is Amazon's smart assistant, similar to Apple's Siri or Google Assistant, which is used across Amazon devices like Echo speakers.

AmazonFresh: Amazon's grocery and fresh food delivery service -- the company has been quietly recruiting for the Australian version since the start of the year. Amazon has gone all in on fresh food in the US, acquiring high-end grocery chain Whole Foods in August and announcing price cuts at the stores. Watch out Coles and Woolworths.

With Kindle and Echo, Amazon is across hardware. With Prime Video, Music Unlimited and the Kindle Store, Amazon is across digital media. Its Amazon Web Services cloud computing division keeps countless websites afloat. And then there are the companies owned by Amazon, like livestreaming platform Twitch, audio book company Audible and digital comics platform ComiXology.

The disruption factor

According to the head of Australia's competition regulator, ACCC chairman Rod Sims, local retailers will be ready for Amazon to launch. And if they're not, they should be.

"Having Amazon come in with a very different model will mean the incumbent retailers will have to be on their game," he said. "That competitive tension will be great for consumers."

With only two large supermarket chains and a handful of electrical retailers, Australians certainly appreciate a need for competition. Add to that the perception that we get a raw deal on tech prices Down Under. The furore over the so-called "Australia Tax" peaked in 2012-2013, when the US dollar had climbed from 60 cents to parity in the space of three years, and tech companies that had always priced products based on that US dollar suddenly met the wrath of Aussie consumers.

Sims says "the worst examples" of Australian price hikes can be traced to this time (who could forget the example of flying to LA to buy Microsoft software and still paying less than in Australia). But he also says some manufacturers have been historically willing to "milk" the Aussie market.

"They're going to try and get the most out of the Australian market at any time they can," he told CNET. "That's why I don't trust [manufacturers] to lift their game. I'm just hoping Australian consumers can work out ways to get the best price."

Where do Aussie retailers stand?

The big thing manufacturers (and competing retailers) need to prepare for with Amazon is Minimum Advertised Pricing.

In the US, manufacturers are legally allowed to set a Minimum Advertised Price for products, and retailers -- whether they're bricks-and-mortar or online stores like Amazon -- can't advertise below this price.

In Australia, the ACCC firmly states that that practice is illegal.

As a result, Amazon could legally use its market power to run loss-leaders when it first launches, getting shoppers through its digital doors with cheap prices.

According to IBISWorld senior industry analyst Kim Do, Amazon "intends to challenge domestic retail prices by offering items for 30 percent less." Good news for customers, bad news for retailers.

One veteran of the retail industry I spoke to said department stores and retailers without a unique selling point will lose out. That might come in the form of great in-store service, speedy online delivery or easy exchanges. Offering last season's range or a poor online experience won't cut it in the Amazon era.

Either way, as we enter the new year, rivalry with Amazon will be a fact of life in Australian retail.

"No one likes facing competition," says Sims, "but that's just the way of the world."

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