Why Amazon Fresh will face obstacles if it launches in Australia next year

Amazon could reportedly expand its food delivery service into Australia as soon as next year, however, one local retail expert believes the US retail giant will encounter similar obstacles to those facing domestic retailers.

Amazon hired a software engineer in 2014 to help develop systems to power the Amazon Fresh service across Australia and according to Fairfax this week, a local launch could happen as soon as next year.

The US retailer’s grocery service, known as Amazon Fresh, is a fresh and frozen food delivery service similar to ones already offered by local supermarkets Coles and Woolworths.

This follows a warning from Wesfarmers boss Richard Goyder, who told the Retail Leaders forum in March that Amazon will “eat all our breakfasts, lunches and dinners,”

“We’ve got big competition online and through a physical presence, we are in a disruptive, disrupted world,” Goyder told the forum.

Amazon Fresh has been operating in the US since 2007 and expanded to the UK this year for Amazon Prime customers in east and central London.

The challenges facing Amazon

Gary Mortimer, a retail expert and a lecturer at Queensland’s University of Technology, told SmartCompany Amazon Fresh will have to overcome some challenges to be successful in Australia.

“In Australia we’re a long way behind, less than two percent of Coles and Woolworths’ sales are online,” Mortimer says.

“Compared to the US and the UK, we’ve got a lot smaller population, and we have challenges associated with geographic distance because our population is so dispersed.”

However, Mortimer says given Amazon’s business model is well-established, Australians will likely not hesitate to get on board.

“The benefits of Amazon’s service is that it can take products from many incumbent retailers, they can even source from delicatessens,” Mortimer says.

“The service has access to over 500,000 product lines in the US, which is significantly more than the 22,000 you would find in a supermarket.”

While Australia has to date seen a slow uptake of online grocery delivery services, Mortimer says that shouldn’t affect uptake should Amazon launch a local grocery delivery service.

“Amazon has great brand recognition, and the Amazon name is certainly of benefit, it conjures perceptions of trust,” he says.