The biggest internet retailer, Amazon launched its retail website amazon.com.au in Australia in the month of December 2017. And ever since its launch in Australia, Amazon is trying very hard to gain more market share and it has been successful in doing so. In the month of September 2018, Amazon Australia started selling pantry food on its website by adding food and beverages to its site. By doing so Amazon created a tough competitive environment for retail companies like Woolworths and Coles.
Recently, Amazon also announced its big plans for the upcoming festive season of Christmas. The company offered tens of thousands of products at very heavy discounts at Black Friday sales which started on 23rd November 2018 and ended on 26th November 2018. Although the Black Friday event has ended but Amazon has not stopped providing heavy discounts on its items. Amazon is selling its product at such a heavy discounts that some analyst fear they might not be able to sustain their business for a long run.
Amazon has started selling products at a relatively cheaper price than other competitors like Coles and Woolworths. Although Woolworth's performance was solid in FY18 with sales of $56.7bn, up 3.4 percent from 2017 and the company has also performed well in the first quarter of FY19, but the new strategies and moves of Amazon have put a competitive pressure on Woolworths. In the first quarter of FY19, the total sales from continuing operations increased by 1.9 percent to $14.8bn and the Australian Food sales increased by 1.9 percent to $9.9bn as compared to the corresponding previous period.
Coles on the other side has recently made its debut on ASX after getting separated from Wesfarmers, and is also feeling the heat from Amazon Australia. Although Coles’ performance in the first quarter of FY19 was very strong with total sales increasing by 5 percent to $9.8bn as compared to the corresponding previous year but with the recent move of Amazon of selling pantry and food items, it is expected that Amazon may eat up Coles market share. It is looking very obvious that Amazon doesn’t want to leave any stone unturned as recently it allowed its customers to shop from its American website also. Earlier they had barred the Aussie’s to shop from its international site due to the new GST Regime but now working out a way Amazon has reversed its decision.
Woolworths Group Ltd.’s (ASX: WOW) shares traded at $29.150 with a market capitalization of circa $38.1bn as on 3rd December 2018 and Coles Group Ltd.’s (ASX: COL) shares traded at $11.62 with a market capitalization of 15.62bn as on 3rd December 2018. Both stocks have fallen lately but Coles has been hit hard with the 10.7% fall noticed in last five trading days alone. Thus, watching out how Coles performs in the next few days will be quite interesting.
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