Retail

Amazon Australia grows revenue more than 1500% but remains a “small proportion” of the retail market

Dominic Powell /

Amazon Australia

Source: Jakub Kaczmarczyk.

Amazon Australia has increased its revenue a massive 1500% in the most recent fiscal year, with financial documents filed with the corporate regulator on Friday revealing revenue of $292.3 million in 2018 compared to $17.3 million in 2017.

However, the company has not yet found profitability, with a total loss of $5.3 million after tax being reported for the calendar year thanks in part to $158 million in general and administrative expenses, and $138 million in sales costs.

In 2017, the company reported a loss of $8.9 million. At the time, retailers on the platform said they were “sceptical of [Amazon] working in Australia”.

The financial documents also reveal the company received a $77 million cash injection from its parent company in the US, which helped bump its cashflow into the green, with Amazon Australia reporting $85.6 million of cash and cash equivalents at the end of 2018.

During the 12-month period, the company paid $250 million to suppliers and $26.8 million to employees, of which it has about 1,500 in Australia. The company also reported it pulled in $106 million from retail sales, a further $23 million from third-party seller services, and $4.3 million from its Amazon Prime subscription service.

Amazon also significantly boosted its marketing efforts, spending a whopping $68 million in 2018 compared to just $1.7 million in 2017.

In a statement, a spokesperson for Amazon Australia said the company was “delighted” with the response from Australian customers, and said the company had grown its offering to more than 100 million items, and provided a laundry list of successful product launches, including Amazon Prime, Amazon Music, and small-business logistics service Fulfilment by Amazon.

“But it’s still day one and we’re just getting started,” the spokesperson said.

“Our focus is on continuing to grow our offering for Australian customers and investing in our local business, creating jobs and economic opportunity for thousands of small businesses across the country.”

The company also posted $158 million in revenue from “other related parties”, however, the company did not specify what these figures refer to. Amazon Australia has more than 10,000 small businesses on the platform, how,ever it also did not break down the amount of revenue those businesses were producing.

Speaking to SmartCompany, retail expert and associate professor at QUT business school Gary Mortimer said Amazon’s $106 million in retail sales placed it at a tiny proportion of Australia’s estimated $28 billion online-retail space, showing the retail giant still has a way to go.

“It’s a pretty small proportion of the market, but Amazon’s approach to market entry has always been a long game, and we’ll see them progressively add in more categories over time,” he says.

Mortimer says the company is likely to continue to utilise other revenue streams, such as money generated from Amazon Prime and cash injections from its US parent company, which he says is a similar strategy used by other international retailers such as Costco and Kaufland.

“I don’t see Amazon having a serious impact on the market until they open more fulfilment centres, in places like Brisbane and Sydney, because that will allow them to get products to market faster,” he says.

“When people have to wait more than three days for delivery, they hesitate.”

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Dominic Powell

Dominic is the features and profiles editor at SmartCompany. Email him at [email protected].

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