Can Locals Profit as Amazon Arrives?

After months of build-up and hype it’s coming. Amazon’s invasion of Australia’s retail space looks set to launch any day now.

The beachhead has already been established. Its massive fulfilment centre in Melbourne’s outer southeast is ready. With quick access to the busiest cargo seaport in Australia, it’s clear Amazon doesn’t intend to start small.

And though the giant hasn’t yet shipped a single package locally, its impact is already being felt. Local retail superstore Harvey Norman saw its profit forecast from Citibank downgraded by 30% as far back as May. That was just on rumours of Amazon’s approach. How much worse will it be when Amazon starts shipping?

Harvey Norman’s chairman, Gerry Harvey, isn’t mincing words, having called Amazon variously a ‘country killer’, a ‘parasite’ that ‘pays no tax’, and ‘the worst possible corporate citizen’.

That may all be true. But Mr Harvey is clearly speaking out of Harvey Norman’s interests.

You may recall similar things being said about Harvey Norman itself — and other big-box retailers — when they swept through Australia. They killed off many smaller, local shops.

Your editor was a fresh immigrant to Australia in 1998, when Harvey Norman was the king of retail. The big box model was dominant through the late 90s and early 2000s. I remember arguments over whether big-box stores were bad for small towns like Traralgon, where I spent my teenage years.

It seemed to me that, if the locals were so sad to see small businesses unable compete, they shouldn’t have been shopping at the big retailers. But ‘mum and dad’ shops, beloved as they may have been, just weren’t as good. They couldn’t be as cheap and they didn’t have the range of the likes of Harvey Norman. 

Now here we are, seeing the ‘big box’ brick and mortar model meeting a similar fate. Who wants to waste a precious weekend wandering around a store? It’s so much easier to just click on what you want, and have it arrive a day or two later.

Perhaps instead of railing against Amazon’s corporate behaviour, Harvey Norman’s leadership should have been looking at ways to beat Amazon at their own game.

These accusations towards Amazon aren’t new. It’s allegedly terrible treatment of staff has been a repeated theme in the press.

As far back as 2011, there were reports of Amazon expecting warehouse workers to toil in an un-air-conditioned building on a 37 degree day, with ambulances waiting in the parking lot. According to local US newspaper The Morning Call, paramedics used stretchers and wheelchairs to carry away collapsed workers during heat waves. Others were expected to carry on working.

In response to that report, Amazon later installed air-conditioners in that warehouse. And last November, amid growing controversy, Amazon announced changes to how it deals with employees. It would focus less on digitally tracking negative performance information, and more on positives. But when Amazon began advertising for workers here in Australia, ran a story with yet more warnings of terrible working conditions and uncaring management.

Obviously these warnings weren’t enough to stop Amazon finding the staff it needs locally. Perhaps nothing can stop Amazon. But our own Sam Volkering has identified some issues that could slow it down.

In his latest special report, Sam looks at a uniquely Australian challenge to Amazon’s operations. If left unaddressed, this could put a serious damper on the much-hyped Aussie launch. But how can the digital retail giant overcome this weakness? Sam argues it will likely be with the help of a local. Which could create an incredible opportunity for you. Read the details of Sam’s research here.

This week in Money Morning

Shae Russell, editor of our sister publication Markets & Money, took the helm in Money Morning this week. She opened on Monday with a look at Myer’s struggling share price, and the woes of retail in Australia. An ‘activist’ major shareholder has stepped up to criticise Myer’s board, saying they want to ‘stop the rot’. But as Shae wrote, their interests may not be the same as those of smaller shareholders. And it’s likely to get worse for shareholders before it gets better. Read why here.

Big investors versus the little guy was also the theme on Tuesday. Shae looked at Australia’s complex, confusing tax system. She argued that those who design and influence it have done so for their own interest, at your expense. Read the details here.

Shae took aim at the Reserve Bank of Australia on Wednesday. The RBA kept rates on hold in their Tuesday meeting, which helped nudge the market higher. But there wasn’t a very large reaction, possibly because the decision came as no surprise.

But Shae believes there’s something that most rate-watchers are missing. That is, that the RBA’s economic data isn’t matching up with Australia’s economic reality. And with rates having been so low for so long, it’s possible our economy couldn’t weather a sudden change. In fact, Shae argues that we shouldn’t expect a rate rise at all in 2018. Read her reasoning here.

Thursday’s Money Morning moved away from central banks and the main stream of finance, out to the fringes. Shae looked at the rise and rise of blockchain — the technology behind cryptocurrencies like bitcoin and ethereuem. Though, perhaps not so fringe after all. The mainstream are starting to catch on to blockchain’s potential. And not just for finance. Blockchain could revolutionise any number of other industries. For Shae’s look at how it could remake the energy industry — and what that means for Aussie investors — check out Thursday’s article here.

And on Friday, Shae looked at the dangers that arise when ego and pride clash with the market. In this case, it’s a $12 billion fund manager, and the kind of losses that make your toes curl. But even for those of us with slightly less to invest, the dangers can still be the same. To read how Shae recommends you avoid them, and for a unique way of analysing markets, find Friday’s article here.

Until next week,

Tyler Jefferson,
Editor, Money Weekend

Tyler Jefferson joined Fat Tail Investment Research in 2012. With a background in publishing, he started out as part of the team working behind the scenes with your Editors to bring you Money Morning each day.

When he joined, Tyler was Fat Tail Investment Research’s 12th employee. Today that number has grown to over 50, as more and more readers turn to Money Morning as their source for independent financial analysis and ideas.

Today as Managing Editor, Tyler still edits the articles you read each day. Along with that, he occasionally contributes to Money Morning with his own irreverent take on the most interesting news and opportunities for you.

Money Morning Australia