Amazon.com, Inc. (NASDAQ:AMZN) is preparing to launch operations in Australia where most people love to buy things by visiting stores and malls rather than online shopping.
According to a report from Bloomberg, the Seattle-based e-commerce giant is “actively looking” for a space to set up a warehouse in Australia.
Amazon wants to replicate its home market success in the global markets. The world’s largest online retailer already started operations in Germany, United Kingdom, Japan, and India.
However, experts believe that Amazon will face “unprecedented challenges in Australia.”
“The cost of serving Australia’s biggest cities, from Perth in the west to Sydney on the eastern seaboard, will undermine Amazon’s high-volume, low margin model,” as reported by Bloomberg, citing Gary Mortimer, an associate professor at Queensland University of Technology’s business school.
“When they [Amazon] arrive, the distance is going to be a problem,” Mortimer said.
Despite the immediate challenges, Amazon sees Australia as a key market of its long-term goal of building a global distribution network, Bloomberg said.
When Will Amazon Start Operation in Australia?
Amazon.com, Inc. (NASDAQ:AMZN) hasn’t disclosed when it will begin operations in Australia. But we expect that the online retailer could launch a retail offering sometime this year.
Sydney-based Citigroup analyst Bryan Raymond told Bloomberg that the e-commerce giant could begin selling everything from non-perishable groceries to books and electronics in Australia by the end of 2017. The analyst believes that the online retailer will launch Amazon Prime in Sydney, Melbourne, and Brisbane in the beginning.
Amazon Could Create Problems for Australia Retailers
A report from Morgan Stanley suggests that Amazon’s arrival in Australia will have a “profound” impact on the country’s $300-billion retail sector.
In a report, titled The Amazon effect in Australia, Morgan Stanley retail analyst Tom Kierath said that Wesfarmers – the largest retailer in the country – will face the biggest impact. The investment bank believes that the retailer could lose more than $428 million in earnings by 2026 in the wake of Amazon’s entry into the market.
Amazon, which announced its plans to enter the Australian retail market in April, has the ability to generate as much as $12 billion in sales by 2026, according to Morgan Stanley.
Meanwhile, shares of Amazon.com, Inc. (NASDAQ:AMZN) were trading up 0.97% on Friday. The company’s stock is up over 34% so far this year. During the last 12 month, the stock’s price has surged more than 38%.