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Amazon has arrived, but there’s nothing to fear (yet)

One of the biggest build-ups in Australia corporate history is finally over, Amazon has opened its doors.

However, the reaction has generally been very underwhelming. Fairfax Media Limited (ASX: FXJ) has done analysis showing that the retail prices really aren’t different to existing retailers like JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN). News Corp (ASX: NSW) media have also done an article showing that the price comparisons are mixed at best.

The products may be the same but how they’re being sold to us is different.

The key reason why the prices seem similar is because Amazon has only opened its Amazon Marketplace. This is where third party sellers use Amazon’s site to sell their services. That’s why you can find products from Kogan.Com Ltd (ASX: KGN) and BWX Limited (ASX: BWX) on the site, but not much official Amazon merchandise yet.

Amazon is taking a slice of the sale price, which reduces the profit margin on those products. However, the predicted 30%-ish discount on these items compared to current Australian retail prices has not materialised (yet).

It seems to me that Amazon has scored a large own goal. The media has built up a frenzy for Amazon’s arrival, effectively giving it a lot of free marketing.

However, it’s first true foray into retailing has left a lot of potential customers disappointed about the prices. It missed the opportunity to make a true impact with amazingly cheap prices. Instead, customers are cynical that they are paying a lot more in Australia compared to the American Amazon site for the same item.

Harvey Norman and JB Hi-Fi could have been the first to be hit, but it seems they have a bit longer to somehow change their business models.

Woolworths Limited (ASX: WOW), Wesfarmers Ltd (ASX: WES) and The Reject Shop Ltd (ASX: TRS) will be glad to see that they won’t be under pressure just yet.

Foolish takeaway

In time Amazon will start selling lots of its own products, but it doesn’t appear as though that will happen this year.

Perhaps a lot of the retail shares are bargains after all.

This share could be the perfect one to benefit from Amazon's fuddled roll-out.

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Motley Fool contributor Tristan Harrison owns shares of BWX Limited. The Motley Fool Australia owns shares of BWX Limited and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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