Retail

The acquisition that stunted Amazon’s growth Down Under

Kevin Moore /

eBay Amazon Australia

Source: Tim Goode/PA Wire.

When Amazon first announced the intention to build dedicated Australian infrastructure to support the brand Down Under, I immediately believed this would lead to a significant increase in sales via this new offering.

New offering, not new brand.

Amazon has been a trusted brand for Australian and New Zealand (ANZ) shoppers for a decade and a half, and a huge player in the technical support of big ANZ businesses and government departments via its Amazon Web Services (AWS). 

Amazon is a huge brand in the minds of ANZ shoppers. And a little tiny rounding error for Amazon’s global business.

That’s not a pejorative comment; it’s a fact for all US-owned ANZ businesses. It’s simply not possible to be hugely relevant in a board room meeting when the US has 330 million of the world’s wealthiest shoppers. We in Australia have 25 million, or the population of Texas with fewer billionaires if you will.

However, that aside, when any large US company puts their collective minds and capital into any market we expect to see significant growth.

But a year in and it feels like Amazon hasn’t yet hit its straps.

Why?

Well a big part of me believes it is because the company that was built on garage sales, eBay, has morphed into a two-brand garage sale and business-to-shopper marketplace very successfully. Backtracking to May 2005, Gumtree was bought by eBay, the latter of which states it paid a total of  US$81 million ($121 million) for three “classified” websites (media speak for physical publications and websites that allow shoppers to sell stuff to shoppers).

Gumtree was started in London as a little website that allowed Aussies, Kiwis and South Africans arriving in or leaving London to sell stuff to each other. Hence the name. Basically where eBay started in the US but without the tri-nation focus. 

Gumtree is now the top classified site in the UK and ANZ.

What that did was allow eBay to leave behind the ‘garage sale’ in the capable hands of the Gumtree brand and team, and move upwards in volume and value to the online marketplace model, connecting brand owners and marketplace suppliers with shoppers. This model allows a much wider and more consistent range of higher value, new items to be offered by trading companies to individual shoppers.

I can clear my garage once every few years, but a company can design and source a wide range of new items and pay to market them to shoppers 24/7.

This is where Amazon came of age, morphing out of books into a marketplace, and then later selling Amazon’s own items and brands via that much larger marketplace.

However, in ANZ, eBay beat them to that spot, and it is proving very difficult to take share back from online shoppers and aligned marketplace suppliers. 

This holiday season will need to be a cracker for Amazon to take share. Expect to see a huge Amazon presence and spend in old-school media, free-to-air television, print, radio and even branded human beings in shopping malls and public spaces to allow this born-digital brand to connect with the 80% of mainstream human shoppers needed for this business to gain scale in ANZ. 

So, what if Amazon doesn’t gain scale in ANZ?

Well, they have more shoppers than people in our country and more capital than our government. I exaggerate for effect, but poor they ain’t. They can trade on for years without making money.

However, I do believe it will trigger a conversation in the board room about investment in infrastructure.

Amazon is getting fatter every quarter as its overhead grows. Soon it may be as fat as a big old physical retailer. Then it will have little ability to differentiate on price.

Happy holidays.

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Kevin Moore

Kevin Moore is a retail expert and the chairman of Crossmark Asia Pacific Holdings and Now Comms Group. He is also an independent director of Australian fintech company InvestSMART.

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