Amazon could launch retail operations in Australia within weeks

US retail giant Amazon could start operations in Australia within weeks. Photo / Simon Dawson

Citi analysts are tipping that US retailer Amazon could launch in Australia within two months to capitalise on the pre-Christmas boost in spending.

Amazon confirmed in April that it was coming to Australia after buying a former Bunnings warehouse in Melbourne and announcing German executive Rocco Braeuniger as country manager for Australia.

Fairfax Media reports that the US$50 billion (NZ$69 billion) retail giant has placed first orders in recent weeks, according to Citi.

"This increases near-term gross margin risks for retailers as price will be Amazon's key lever," it said. "Amazon will not have a meaningful advantage in two of their three key pillars in the short term (range and delivery, which will evolve over time). As a result, we expect prices to be competitive in order to drive volume."

Citi estimated the impact of Amazon's arrival in Australia in the second quarter of 2018 could be US$200 million (NZ$277m), or 0.2 per cent of total retail sales.

The analysts said the retailer was expected to maintain its strategy of matching or offering the lowest price in the market.

"This could spark a response from incumbent retailers who are intent on not being beaten by Amazon on price during the key pre-Christmas sales event," it said. "In our view, lower pricing will likely be the result of Amazon's lower margin and ROI [return on investment] expectations, particularly in the short term."

Citi believes that if Amazon does launch during the Christmas shopping period a number of retailers including JB Hi-Fi, Harvey Norman, Myer will feel the pinch.