Despite touting its Australian launch as record-breaking and “far exceeding” expectations, numbers on Amazon’s Australian launch have told a different story, with the company posting a whopping $8.9 million loss.
News.com.au reports the company’s director’s report filed with the Australian Securities and Investments Commission shows Amazon Australia posted a loss before income tax of $12,193,613 from January 20, 2017, to December 31, 2017.
Taking income tax benefits into account, news.com.au reports the company’s total loss for the period was $8,924,727 from a revenue of $17,381,136.
Amazon’s local online marketplace launched late in the year on December 5, so this $8.9 million loss applies largely to a period of just 26 days, though expenses such as salaries, marketing, and other operating costs would have likely spread over much more of the year.
Sign up for SmartCompany newsletter.
Free to your inbox every weekday
But regardless, it’s nothing to write home about, and certainly seems out of whack with the record-breaking user numbers Amazon Australia’s country manager Rocco Braeuniger said the site experienced on the day of the launch.
“We are thankful to Australian customers for making this a landmark day in Amazon history. From early in the day, we experienced visitor numbers that far exceeded our expectations,” he said at the time, reports Fairfax.
Amazon’s Australian launch was long-anticipated, but is largely viewed now by both consumers and businesses as over-hyped and under-delivered, with customers complaining about the high prices and low range of products on the site.
For Australia’s small businesses, sales have been beyond sluggish, with numerous businesses telling SmartCompany they’re fed up with the retailer, and they believe ‘tried and true’ marketplaces such as eBay offer better value.
Founder of Trike Bike Michael Coates told SmartCompany in April Amazon Australia was “all fizz and no substance”. He questioned how the site was promoting his products after he saw minimal sales despite spending $3,000 to establish his Amazon presence.
“After about three months we hadn’t made any sales at all and it cost me quite a lot,” he said at the time.
“The disappointing thing is I can handle not getting sales if it was a product no one wanted, but we’re just not getting traffic.”
“We’re sceptical of Amazon working in Australia”
The owner of another Australian small business, speaking to SmartCompany anonymously, says their Amazon sales have been extremely slow over 2018.
“It was promising in December, but now it’s died off and slowed to a trickle,” they say.
Commenting on the $9 million loss, the business owner isn’t surprised, as they believe Amazon is spending big on marketing to try and promote the business locally. According to the documents filed with ASIC, Amazon Australia spent $1.73 million on marketing in 2017.
Amazon has been known to rack up losses for multiple years in new markets, with the company posting a $US3 billion loss internationally in 2017, largely thanks to its struggles establishing a presence in India.
But while this business owner acknowledges big losses are the norm for companies like Amazon, they believe it could be numerous years before Amazon Australia stops losing money.
“From what we’ve seen so far we’re sceptical of [Amazon] working in Australia,” they say.
“Amazon has been known to be in for the long game, but they’d have to be willing to take losses for potentially 10 years to make it work in Australia.”
In the wake of its largely disappointing Australian launch, Amazon has totally nixed its subscription fees for businesses on its marketplace, but intends to start them again in 2019. This business, which makes just “a handful” of sales a month on the site, says it will likely cease selling on the platform once subscription fees begin again.
According to the business, Amazon’s sales commissions are also much higher than other platforms, with the company pulling a commission of 6-15% on sales depending on the category.
SmartCompany contacted Amazon Australia but the company did not respond prior to publication.
|Passionate about the state of Australian small business? Join the Smarts Collective and be a part of the conversation.|