Amazon.com, Inc. (Nasdaq: AMZN) finally made it Down Under this week, launching its e-commerce platform in Australia. The move is a big step in Amazon’s global push, but analysts say it may take a while for the company to work out the kinks.
Bank of America analyst Justin Post says the new platform is underwhelming compared to what Amazon offers in the U.S. Amazon Australia currently has a limited number of categories, a high percentage of third-party products with longer shipping times and higher prices than local competitors on a number of items.
However, Post says Amazon will improve its Australia offering in 2018 and may have simply jumped the gun with the launch to make sure to capture as many holiday shopping sales as possible.
“We would expect Amazon to follow its playbook in other countries and enhance selection (more first- and third-party inventory), pricing (algorithms will get experience) and delivery times (postal agreements, local capabilities),” Post says in a report.
In the meantime, Post expects Australia won’t move the needle much in either direction for Amazon. Last year, e-commerce sales in Australia totaled $14 billion compared to the massive $408 billion U.S. market. Australia’s current market is roughly in line with the size of India’s $13 billion e-commerce market, but India’s market is growing at a 40 percent annual rate compared to Australia’s 9 percent growth rate.
Post says one potential winner from the unimpressive launch could be eBay (EBAY). Australia is eBay’s fourth-largest global market, and the stock jumped 4.4 percent this week following the mixed reviews of Amazon Australia.
For now, Post says international launches, delivery expansion and competition from Wal-Mart Stores (WMT) will likely keep Amazon’s margins very tight, limiting profitability.
“We think Amazon may continue to get a free pass on International margins in 2018 if International growth accelerates and US retail margins stabilize,” he says.
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