Australian retailers turn to third-party fulfilment sites for sales

Australian retailers are increasingly turning to third-party fulfilment sites as a means of increasing direct to consumer sales.

Following the arrival of e-commerce giant, Amazon, Australia’s retail landscape has undergone a considerable period of change, with department store groups Myer and David Jones amongst the retail chains to be most impacted by the so-called Amazon/Alibaba effect, according to a recent survey by Urban Property Australia.

Traffic to Amazon’s Australian site has risen 9.1 per cent since December 2017, but not all retailers are feeling the brunt of the shift towards e-commerce, with many hailing third-party fulfilment sites as the driver behind an increase in online sales.

Canningvale was amongst one of the first Australian brands to join Amazon’s marketplace in December 2017, according to a recent article by The Australian Financial Review, and the company is reporting that online sales now represent 70 per cent of their total sales.

Canningvale was also one of the first Australian brands to adopt the new third-party fulfilment platform by Amazon.

Launched in Australia in February 2018, Fulfilment by Amazon enables retailers to sell their products on Amazon’s online marketplace, whilst the e-commerce giant takes care of the storage and shipping of inventory to consumers, as well as customer enquiries.

This model allows suppliers to distribute products more efficiently for consumers by cutting out the retailer, but is also being praised for enabling brands to establish a direct communication with their consumers which often isn’t available when selling through retail chains and department stores.

Investment banking company Morgan Stanley predicts Amazon’s Australian sales will rise from $1.8 billion in 2018 to $9 billion by 2025, representing 21 per cent of online sales.

However, Amazon isn’t the only online marketplace adopting this new model, with leading e-commerce companies such as Lazada launching their own third-party fulfilment sites in a bid to harness market demand.

Mair Property Funds Managing Director, David Ellwood, says the expansion of third-party fulfilment sites is a factor commercial investors will need to take into account during their asset selection process.

“As the move towards third-party fulfilment sites continues, investors will need to consider which retail sites are best-positioned to weather the changes brought about by the rise of e-commerce,” he said.

Mr Ellwood says there is still significant hope in Australian retailers who are willing to adapt, but investors need to make smart decisions when identifying investment opportunities.

“In the past few years, we’ve seen a rise in the number of shopping centres and Australian retailers increasing their focus on retail experience and product offering in a bid to drive foot traffic to their sites”

“Investors need to look towards assets that are prepared to adapt alongside an evolving marketplace in order to continue achieving growth and steady income returns.”

Mair Property Funds is a Western Australian company specialising in the acquisition and management of commercial property through unlisted property trusts. Our acquisitions specialists are focused on identifying superior investment opportunities through the close monitoring of industry trends and the local property market.

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