Amazon hammers Australian retail stocks

Amazon hammers Australian retail stocks
While Australian retailers are nervous about Amazon’s arrival in Australia, Amazon’s plans to buy Whole Foods for $13.7 billion and disrupt supermarkets hit Australian retail stocks yesterday.

Woolworths shed 92 cents or 3.5 per cent, Wesfarmers, owner of Coles, fell 0.22 per cent, Metcash which runs IGA supermarkets slipped 2.33 per cent, JB Hi Fi lost 63 cents or 2.7 per cent, Myer fell 2.19 per cent and Harvey Norman finished 3.08 per cent lower.

Overall, the Australian consumer staples sector fell 1.3 per cent yesterday when the S&P/ASX 200 Index was up 0.3 per cent.

This mirrored the impact in the United States when the announcement of Amazon’s move on Whole Foods sent shares in US listed retailers Kroger, Target, SuperValu, Costco and Walmart plunging.

Analysts say there is now the prospect of Amazon Fresh competing with Australian supermarkets.

However, there is a view that the market might be over-reacting particularly given that Amazon has yet to roll out its full retail offer in Australia.

In a note to clients, Citi analysts led by Brian Raymond said the shift in strategy for Amazon towards acquisitions, grocery and omni-channel retailing had its challenges.

“Amazon’s penetration in grocery is likely to be small and pricing to be less disruptive as Amazon has (to date) taken a premium approach to grocery, with price points above major bricks and mortar competitors. As a result, we see less risk to Coles and Woolworths from Amazon than discretionary retailers,” Citi said.

An acquisition of Coles and Woolworths was unlikely because the Australian grocery sector was more consolidated, Citi said, and a takeover of the more vulnerable Metcash was also not expected as “Whole Foods is an acquisition of a retail footprint, rather than product or logistics capability”.

It said Amazon will be disruptive to all retailers when it enters Australia, but its success would be determined by access to product and distribution points, particularly in grocery.

 



An award winning author and journalist, commentator, lecturer, and speaker, Leon is a freelance business journalist who covers a range of areas including politics, strategy, globalization, leadership and all the big trends ahead. His main skill is summing up all the news that’s around. For the last 30 years, his main focus has been on management issues. He also produces two podcasts for RMIT University, Talking Business and Talking Technology. Leon has worked for Fairfax, News Limited, AAP and the Herald and Weekly Times.


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