One number proves Amazon’s Aussie problem
WHEN Amazon launched in Australia with much fanfare in December, it didn't take long for the company to start touting its success.
In fact, according to Amazon, the number of first-day orders in Australia were higher than for any other launch day in any other country in Amazon's 24-year history, with tens of thousands of curious shoppers visiting the site within the first 24 hours of trading.
But while Amazon Australia's country manager Rocco Braeuniger has claimed visitor numbers "far exceeded" expectations, Australian Securities and Investments Commission (ASIC) documents seen by news.com.au tell a different story.
A director's report filed with ASIC and signed off by Mr Braeuniger earlier this year revealed Amazon's loss before income tax from January 20, 2017 to December 31, 2017 was $12,193,613 from revenue of $17,381,136.
An income tax benefit of $3,268,886 means Amazon Australia had a net loss of $8,924,727 after launching its Australian online marketplace on December 5.
But don't feel too sorry for billionaire Amazon founder Jeff Bezos, because according to consultant Brian Walker from Retail Doctor Group, the company's staggering Australian loss is all part of its plan.
"In my view - and we understand Amazon; we've researched its global patterns - this is all part of the plan," he said.
"Amazon typically doesn't make revenue at all in the first few years and it was literally 15 to 18 years before it was operating a return, but now it's a $850 billion market-capped business that's closing in on Apple, which is a trillion-dollar business.
"This is absolutely on plan. I think they've been pleased with their opening."
Mr Walker said the company would have factored in operational costs that come with launching in a brand new country, and that Amazon would be planing for a steady build approach.
"Start ups of this scale put a lot of money out before they get money in; that's just the nature of it," he said.
"Generally, it's on track with an operating plan that's consistent with what we see globally."
Whether or not Amazon's first-month results were deliberate, they prove the online juggernaut failed to dominate the market during Australia's $50 billion pre-Christmas spending spree.
Just $6.3 million was spent on first-party sales - which include items that are stocked and sent to shoppers by Amazon itself - from its launch until December 29.
Third-party sales - or goods sold by other companies on amazon.com.au - accounted for slightly over $1 million, while a commission of between eight and 12 per cent on those sales would have brought the total third-party sale revenue to about $10 million during that period.
Amazon also experienced backlash from frustrated Aussie shoppers during its first Amazon Prime Day in the country last month.
While the business hailed the 36-hour sales event as a huge hit, many shoppers slammed the mediocre discounts and limited offerings available.
In response to that backlash, Queensland University of Technology retail expert Dr Gary Mortimer said it seemed Amazon was struggling to lure Aussies onto the site, and that it was paying the price for its delayed entry into the local market.
"One of the challenges Amazon faces entering the market so late in the game is that shoppers have already developed relationships with incumbent online players and multichannel retailers, and shoppers are now saying, 'what is the value in moving across to an Amazon platform?'" Dr Mortimer told news.com.au last month.
Amazon was approached for a response for this article, but declined to comment.