Amazon faces tough entrance to the Australian market
Retail giant Amazon’s entry into Sydney may not be all that smooth, as its huge operational requirements may be difficult to manage initially, at least.
Amazon’s value proposition combined with its need for immense space may make it difficult to find a suitable base within Sydney, says a new report from Colliers International.
The report studied Amazon’s footprint in other global markets to determine how the online retailer would make its mark on the Sydney industrial market.
The sheer volume required by Amazon, combined with the need to deliver produce within an extremely short time-frame, means that it may struggle to find a space that meets its needs within the inner-Sydney ring, it said.
“Amazon’s value proposition lies in its ability to offer an extensive range of consumer products at low prices by providing a unique customers experience which is dependent on delivering goods with speed, elasticity and mobility,’ said Colliers International research manager, Sass J-Baleh.
To fulfil their value proposition, Amazon’s key activity boils down to its logistics and distribution process – it requires a sufficient supply chain management. This means Amazon’s key resource is its Transit Warehouses/ Fulfilment centres, which typically occupy 100,000 sqm of space.
The report found that Amazon’s Fulfilment Centres (FCs), which is where a large majority of the goods are packed and distributed, are typically 100,000 sqm, with a global average of 64,000 sqm.
The company also relies on Fresh Food Distribution Centres, Regional Sortation Centres, Delivery Stations and Prime Now Hubs which typically occupy an average of 40,000 sqm, 30,000 sqm, 10,000 sqm and 6,000 sqm respectively.
Amazon currently operates in 14 countries and has 393 active facilities with a combined facility space of 13 million sqm.
The Colliers report draws parallels with Canada and certain other countries to identify how Amazon might operate in Australia.
“Canada is a country with a population greater than that of Australia, and they have only established six facilities with the population distribution concentrated into a small number of cities,” J-Baleh said.
“We already know that Amazon has recently secured one of its purpose-built FCs at Eastern Creek within Sydney’s Outer West sub-market, that is around 100,000 sqm.”
“This is advantageous as it is adjacent to the Sydney Orbital Network, providing direct access to a large share of the NSW market.”
“However, with over 64 percent of the total NSW population currently concentrated within the Sydney Metropolitan, Amazon may struggle to find facilities which will allow them to adhere to their 1-2 hour delivery time within this area.”