Two global retail giants pose a threat as spending slows

Amazon and Aldi are tipped as rising threats to Australian retailers, as experts predict both brands are poised to grow market share this year against a backdrop of budget-savvy consumers.

Local retailers are bracing for spending conditions to weaken further throughout the rest of 2023, after Australian Bureau of Statistics trading numbers for February showed that turnover growth flattened to just 0.2 per cent for the month.

Despite this, analysts say there are still pockets of strength in the industry, and companies like e-commerce marketplace Amazon are set to further excel this year.

Amazon, which launched in Australia just over five years ago, saw revenues hit $2.63 billion last year, up from $1.75 billion in 2021, according to documents filed with the corporate regulator.

Jarden analysts say the platform’s traffic grew by around 20 per cent last year, putting Amazon on track to overtake eBay as the country’s number one marketplace in 2023.

MST Marquee’s Craig Woolford highlighted that Amazon accounted for more than half of the country’s online retail growth last year. MST estimates the company now has 2.9 million valuable subscribers to its Prime loyalty program.

“Subscriptions are an important battle in our view because a subscription is likely to lead to a stickier (some call it loyal) shopper,” Woolford explained in a note to clients.

The growth of Amazon’s retail ecosystem comes after significant investment in the group’s Australian distribution footprint, and MST Marquee’s team says this raises questions about how much fellow retail giants Woolworths and Wesfarmers will spend to compete with the online retail giant.

“We expect Amazon to continue taking share online given the installed base of Prime members. The unknown in our mind is how much money Wesfarmers and Woolworths will be willing to spend to carve out their position online in competition with Amazon,” the group said.