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Insights from Amazon's FY23 results

Amazon expanding fast while Temu and Shein are disruptive

06 March 2024

Amazon’s latest Australian accounts show its market share gains are accelerating. In 2023, we calculate the online retailer had $5.8 billion in gross transaction value (GTV), which would account for one in $10 of all online spending by Australians. It could reach $10 billion in GTV over the next three years. While Amazon is winning share, we find that it is doing so rationally on price.

Retail sales for September 2022

Online normalisation continues

05 November 2022

Australian retail sales rose 18.6% year on year in September 2022. The three-year compound annual growth rate for September was 8.8%, an acceleration on 7.7% in August. Interestingly, COVID-19 winning categories, hardware and furniture, have started to slow this month. Online sales have continued to fall, down 18.6% year on year, largely reflecting lockdowns last year. The three-year CAGR remains at 27%. We expect overall retail sales will show weakness in November as we lap large Black Friday sales. Retail sales are likely to be softer in 2023 as higher interest rates take effect and savings rates are lower.

Retail sales for August 2022

Online sales decline

06 October 2022

Australian retail sales rose 19.4% year on year in August 2022. The three-year compound annual growth rate for August was 7.7%, very similar to July 2022 at 8.3%. The most interesting headline is online sales were down 15% year on year, but this largely reflects lockdowns from last year. The three-year online CAGR is still 27%. We expect overall retail sales will remain firm with the first signs of weakness likely in November 2022 given two years of high growth for that month. Retail sales are likely to be softer in 2023 as higher interest rates take effect and savings rates are lower.

Retail sales for July 2022

Looking through lockdowns

07 September 2022

Australian retail sales rose 15.8% year on year in July 2022. The three-year compound annual growth rate for July was 8.3%, broadly similar to June 2022 at 7.8%. The year on year growth will be very noisy over July-October given lockdowns from last year. We focus on growth vs 2019 and on that score, recreational goods, apparel, footwear and jewellery had the strongest growth in July 2022. In our view, retail sales will remain firm with the first signs of weakness possible in November 2022. Retail sales are likely to be softer in 2023 given lower household income growth.

Wesfarmers (WES) four strategic questions on our mind

Considerations ahead of strategy day

30 May 2022

We would not ordinarily preview a strategy day, but Wesfarmers event on 2 June 2022 will be more interesting than usual given the importance in understanding its digital strategy and its Health segment ambitions. We have outlined the key questions on our mind. While Wesfarmers has very strong existing retail businesses, the future direction and capex required make us cautious about the earnings outlook.

Woolworths (WOW) acquisition of MyDeal

Is it a small deal?

20 May 2022

Woolworths has announced its intention to acquire 80% of MyDeal for $243 million and a substantial takeover premium of 63% compared with its prevailing share price. MyDeal is loss-making and we expect losses to continue over the next 12 months. The rationale for the deal is to build marketplace capabilities. While understandable, this only heightens our concern that Woolworths, Wesfarmers and Amazon will all battle it out over the next three years for the upper-hand online. We are not sure who will win, but we are confident that it will be costly for all involved.

The Retail Mosaic Issue 1

Where does online penetration settle in Australia?

15 September 2021

Australian online sales represent 13% of all retail sales. Even though growth has been very strong over the past five years, we expect online to continue to grow much faster than bricks & mortar. In Issue 1 of The Retail Mosaic, we size the Australian online market by category, compare Australian retailers with US and UK peers and provide a framework for online penetration growth over the next decade. Australian online penetration is likely to reach 21% in the next ten years. This level of growth online means mature retailers will need to eliminate net store openings, invest more in their IT and supply chain and improve their customer data.

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