Not only is it the obvious risk faced by retailers, but also the commercial, retail and industrial property sectors, including malls, and ultimately also supermarkets and department stores.
The US online giant’s pending incursion into Australia has prompted mounting concern from retailers there, while Forsyth Barr broker Damian Foster said its entry into New Zealand during the next few years could have a "significant impact" on the local corporate landscape.
"A physical Amazon entry with Prime subscription on offer would likely accelerate e-commerce growth in New Zealand, putting traditional business models at risk, while offering opportunities to its future partners," he said.
Earlier this week The Australian Financial Review said Amazon had reportedly leased its first distribution centre in the outer southeastern suburbs of Melbourne.
Mr Foster expects Sydney and Brisbane to be the next targets for the "giant logistics warehouses" Amazon needs to anchor its distribution networks.
"Faster e-commerce delivery options will result in more warehousing and logistics space in key locations," he said.
He said the most exposed of New Zealand’s listed companies to an Amazon incursion would be Briscoes, The Warehouse, Sky TV, Stride Property and NPT Ltd.
Earlier this year Amazon, founded in 1994, confirmed it would be launching its full offering in Australia, including Amazon MarketPlace, Amazon Prime Now and eventually Amazon Pantry and Amazon Fresh.
"The writing’s on the wall and it looks pretty intimidating for companies that haven’t made that tech leap yet," Mr Foster said.
He said products which had the highest e-commerce penetration included books, electronic goods and apparel. Retail categories which were commoditised, low service, and low experience-oriented would also be affected.
"As a result we expect department stores and supermarkets to be impacted, while heightened competition will result in greater remixing of specialty retail tenants," Mr Foster said.
Mr Foster outlined three scenarios of how Amazon could launch a beachhead in New Zealand during the next five years.
One was to have all New Zealand online orders serviced by Australian distribution centres. The second was to have a local online domain and a sorting centre in Auckland or Waikato to handle deliveries from Australian distribution centres.
His third scenario had a Full Prime offering — Amazon opening a distribution centre in Auckland or Waikato, with a sorting site in the South Island.
"Amazon would provide a full range of categories in the market," he said, of scenario three.
At present, online retailing in New Zealand had about a 7.4% penetration, but if the Full Prime scenario were under way Mr Foster expected that would grow to 12.2% in about five years.
A step-up in investment by Amazon between No Prime and Full Prime would be significant, he said. Consequently, the market impact of a Full Prime New Zealand launch would be material, with major implications for retailers, media players, telcos, property companies and tech firms.
"Amazon’s willingness to accept slim margins and pass on cost savings to consumers has helped transform the e-commerce and adjacent landscapes in other countries it’s touched," Mr Foster said.
He expects Amazon to introduce its Marketplace division to Australia in 2018.
"We expect it to offer a Prime subscription to Australian consumers, which combines free shipping, video/music streaming and unlimited photo storage," he said.
While its Marketplace division would provide a platform for third-party sellers, Amazon’s own fulfilment — its distribution and logistics capability — would have a "major impact" on the Australian retail landscape, he said.
"Once Australia is bedded in, New Zealand presents a logical extension to Amazon’s investment in the region," Mr Foster predicted.
Mr Foster also delivered a caution to the property sectors.
"An Amazon entry into New Zealand would accelerate e-commerce penetration and increase structural headwinds for retail property owners," he said.
Of the NZX-listed property vehicles, Kiwi Property Group, Investore, Stride Property Group and NPT had substantial portfolio weightings with retail assets of more than 50% and were most at risk.
"We believe larger destination malls will continue to take market share from smaller sub-regional and neighbourhood malls, which favours Kiwi Property’s portfolio over Stride’s and NPT’s," he said.
Investore’s portfolio was different from its peers, being 95% in supermarkets.
"While its long lease terms add a defensive element to this stock, we believe e-commerce will materially impact in-store grocery sales," Mr Foster said.
The remixing of tenants into defensive categories would help mitigate the threats posed by Amazon, he said.
"Strong operators are increasing exposure to entertainment and service offerings such as dining lanes, cinemas and personal services like nail bars," he said.
Those categories were less susceptible to online threats and would help defend market share, Mr Foster said.
In Australia, research specialist IBISWorld indicated concerns over the impending entry of AmazonFresh in 2018 were "overplayed" in the Australian supermarkets and grocery stores industry, IBIS’ senior industry analyst Nathan Cloutman said in a statement.
His analysis suggested traditional bricks-and-mortar and online grocery players would not be as severely affected by Amazon as operators in other retailing industries.
"Online shopping penetration is much lower in Australia than in other countries where Amazon has launched its grocery service," he said.
Last month Amazon acquired US grocery chain Whole Foods for $13.7billion.
In the US and UK, online grocery sales accounted for about 6% of total sales, Mr Cloutman said.
He said he considered AmazonFresh was "unlikely to launch in the New Zealand market in the near future", because of the relatively small size of New Zealand’s industry, compared with Australia’s grocery market.
Australian offerings
Amazon MarketPlace, Amazon Prime Now, Amazon Pantry, Amazon Fresh
EFFECT IN NZ
NZX stocks most likely to be impacted by potential Amazon New Zealand entry:
• Briscoe Group and Kathmandu — Amazon’s dynamic pricing puts high-price-to-clearance-sales strategy at risk.
• Sky TV — Amazon likely to pursue high-value content.
• Stride Property and NPT — Smaller malls struggle for foot traffic.
• The Warehouse — Competition in key categories.
• Kiwi Property Group, Investore, Stride Property Group and NPT Ltd — all with high exposure to the retail sector.
— Forsyth Barr Research
