The impending arrival of Amazon in Australia has become all the more worrisome for domestic retailers after the disruptive e-tailer announced plans to buy Whole Foods, the upmarket US grocery chain.
The proposed deal, for $13.7bn in cash, put a chill through the US consumer staples sector, which fell 1 per cent and was the worst performer in the S&P 500 on Friday.
In Asia, the potential impact of that deal is being felt most acutely in Australia. Although there has been no immediate announcement Amazon will transplant Whole Foods Down Under, investors are already assuming the worst – that the company will help erode the duopolistic nature of the Australian supermarket landscape.
Australia’s retail sector has been under pressure this year after Amazon announced it would bring its service to the country. Many analysts thought this would harm department store operators and some electronics retailers, and marked share prices down accordingly.
The two main supermarket groups – Woolworths and Wesfarmers-owned Coles – are already facing growing competition from overseas entrants such as Aldi, but were thought to be left relatively unaffected by Amazon’s proposed move to Australia. The Whole Foods deal will prompt a reassessment of that initial view.
The Australian consumer staples sector fell 1.3 per cent on Monday, compared to a 0.3 per cent gain for the S&P/ASX 200 benchmark.
That came courtesy of a 3.4 per cent drop for sector heavyweight Woolworths, which was eyeing its biggest one-day drop since in almost 13 months. Wesfarmers, which owns a suite of retail assets including discount department stores and supermarket Coles, was down 0.7 per cent. Metcash, a second-tier player in the domestic supermarket sector, was down 2.1 per cent.
Australian discretionary retailers, which have already borne the brunt of the expected “Amazon effect” this year, were whacked again. Department store operator Myer and electronics retailer Harvey Norman are seen as likely to lose market share to Amazon, and were down 3 per cent and 2.7 per cent respectively. Even specialist retailers such as JB Hi-Fi and Super Retail Group were lower.
Scentre Group, which runs Westfield’s Australian shopping mall assets, recovered early declines to be up 0.1 per cent.
In Singapore, Jardine Matheson Holdings, whose subsidiaries include a supermarket operator, was down 1.3 per cent and one of only four stocks in the 30-member Straits Times to be in negative territory on Monday. The Straits Times was up 0.4 per cent.