The rise of Amazon.com Inc (NASDAQ: AMZN) here in Australia has been spooking ASX retail shares and their investors for more than five years now. Ever since Amazon first launched its local marketplace here in Australia back in 2017, investors have been warned of the bleak future awaiting ASX retail shares.
Almost six years on, it's clear that Amazon's local shopfront, while still wildly successful, hasn't exactly ended the Aussie retail sector.
But, as is always the case for ASX retail shares, there is still no time for laurel resting. The retail space is infamous for its cutthroat competitive pressures. Its players are also constantly at the mercy of changing trends and tastes.
And, if one ASX expert is to be believed, Amazon isn't done trying to take its pound of flesh either.
Amazon is coming for Australia's shoppers
According to a report in The Australian this week, analysts at Jarden have recently come out with some analysis of the future of Australia's retail space. In fact, Jarden's analysis concludes that Amazon is on track to grow its gross merchant value (GMV) in Australia by 25% in 2023 to $5 billion, followed by another 10% rise in 2024 to $5.5 billion. And that's its 'conservateive' scenario.
According to Jarden, this expansion will be driven by "expansion of same-day delivery, rapid penetration of Prime and range expansion to more than 200 million stock keeping units (SKUs) with a focus on consumer value". Amazon is reportedly targeting a long-term GMV of between $19 and 22 billion for the Australian market.
So if this all plays out as Jarden is expecting, it will obviously have an impact on many ASX retail shares.
Jarden has identified a long list of ASX retail shares that could be the most impacted. These include:
- JB Hi-Fi Limited (ASX: JBH)
- Super Retail Group Ltd (ASX: SUL)
- Wesfarmers Ltd (ASX: WES)
- Accent Group Ltd (ASX: AX1)
- Reject Shop Ltd (ASX: TRS)
- Baby Bunting Group Ltd (ASX: BBN)
- Kogan.com Ltd (ASX: KGN)
- Temple & Webster Group Ltd (ASX: TPW)
- Adore Beauty Group Ltd (ASX: ABY)
Should investors bail out of ASX retail shares before it's too late?
So with these 'victims' of the Amazon juggernaut identified, should investors just bail out now, before they are wiped out?
Well, not so fast. For one, as we mentioned earlier, reports of the death of ASX retail shares thanks to Amazon have been premature for the decade in which the American behemoth has been active in Australia. In fact, many have thrived alongside Amazon.
Just take a look at the JB Hi-Fi share price (one of Amazon's fiercest competitors) below if you have any doubts:
Many of the shares listed above have also performed similarly, and seem to know how to keep Amazon at bay. The US giant doesn't have a monopoly on innovation, after all.
But it's also worth noting that Jarden's opinions aren't the only ones out there. Many other ASX experts view the situation facing ASX retail stores very differently. For instance, Goldman Sachs recently came out with a buy rating on Super Retail Group shares, together with a $14.90 share price target. Goldman noted Super Retail's "resilience" and "competitive advantage of high loyalty" in justifying its confidence.
Similarly, Goldman also has high hopes for Accent Group. It also has a buy rating on this ASX footwear retail share, justifying its rating by pointing to this company's popularity with younger shoppers.
And last month, we looked at the views of another ASX expert in broker Morgans. Morgans reckons both Adore Beauty and Baby Bunting shares are undervalued right now.
So yes, Amazon remains a potent threat to many ASX retail shares. But views are certainly not aligned on the ASX when it comes to their resilience to the American invader.