Amazon Australia’s 2022 financial results reveal the retailer has delivered very strong sales growth with improving profitability. This is in stark contrast to the declining sales and loss-making results for some online pure plays. In our view, Amazon is investing for the long-term, which is evident in its distribution centre infrastructure, marketing investment and Amazon Prime membership, which may now be one in four Australian households. The debate in our mind is how much money and time will be spent by Wesfarmers and Woolworths trying to establish their own online ecosystem. We expect it to be costly for all involved.

Amazon has made some noteworthy decisions in Australia. It now has a massive 200,000 sqm distribution centre (DC) operating in Western Sydney and has held back on raising the price of Prime, unlike the US. Is this a sign of more aggressive customer acquisition in Australia? Why is Prime so much cheaper here than in the US? In our view, Amazon is simply in its infancy. It will need to expand its same day delivery service before lifting the price of Prime. In order to offer same day delivery, Amazon probably needs 3-4x the DC capacity that it has today.