UBS released a report on Amazons impact in Australia over the...

UBS released a report on Amazons impact in Australia over the next few years.

The report claims that in Canada which is a similar market to Australia, Amazon rolled out its full retail offer eight years after launching Marketplace – but is now generating revenues of $3 billion and growing sales by around 50 per cent a year after expanding its product range by about 90 million units to about 130 million units since 2013 and opening seven distribution centres.

“After two to three years as they start to get scale they’ll build designated warehouses and that’s when the impact will be felt in a material way.

“The big factor will be the launch of Amazon’s subscription service Prime. When customers pay an annual fee, they get free delivery and that’s when people start Amazoning for things rather than Googling things.

What retailers are going to have to learn is how to make profits in a market impacted by Amazon who will drive consumers to online where retailers’ margins are thinner, they will also force retailers to invest hundreds of millions of dollars into e-commerce infrastructure which may take years to deliver returns.

UBS estimates that margins for major listed retailers will fall by between 100 and 200 basis points by 2023, dragging down earnings by as much as 20 per cent, with Super Retail Group, Myer and JB Hi-Fi the most exposed.

The graph below represents the assumed margin impact by retailer in basis points: