The proposed acquisition of Whole Foods signals Amazon’s ambition to grab a greater share of consumers’ wallets with a move into groceries. For an analysis of the deal please read Amazon and Whole Foods: Grocery Apocalypse which appeared in this weekend’s print edition of Barron’s.
The evolution of Amazon’s business model should be disconcerting for the three retailers that dominate Australia’s supermarket industry. While they have talked up the size of their store networks, many analysts say Amazon will eat away at the earnings of Australian retailers, including supermarket operators. For more details please read Amazon To Take Toll on Aussie Retail Stocks; JPMorgan Slashes Forecasts and Wesfarmers: Why Goldman Sachs Says It Can Survive Amazon’s Move Into Australia.
The U.S. e-commerce giant announced earlier this year that it would roll-out a full offer in Australia this year. Retail stocks, especially those that sell appliances and electronics, have been hit hard. JB Hi-Fi is down 18% this year, while Harvey Norman is down 25% this year.
Harvey Norman founder Gerry Harvey was featured in The Sydney Morning Herald on Monday arguing that Amazon’s expansion in Australia will be slower than expected. Here’s a taste of what he had to say:
Mr Harvey said Australia – with its low population density and high labour costs – should be well down the list of places for Amazon to expand.
“For their model to work they would need 50 warehouses in Australia. Start with two – one in Sydney and one in Melbourne – and then it’s how do you deliver? That’s the best-case scenario.”
“I know how long it takes.
Harvey Norman shares were last down 2%, JB Hi-Fi had lost 1.2%, and department store operator Myer (MYR.AU) was down 2.5%.