The news that Amazon is coming to Australian shores has the local retailing community set for something of a shake-up; and the pharmacy sector is not immune to the imminent disruption. In January 2017, 38% of Australians were aware of a potential Amazon launch, this increased to 47% by March 2017.
And, recent Nielsen Digital Ratings data reports that as many as 4.6 million adult Australians accessed the Amazon U.S. site during October 2017.
With speculation that Amazon is finalising its strategy on the sale of prescription medication online in the U.S., it’s worth considering the implications of such a service in our own backyard.
Accounting for just over 2% of total grocery sales, online grocery shopping in Australia is growing seven times faster than the total market and is predicted to inject up to $2 billion of incremental sales into the industry over the next five years. Amazon’s arrival to Australia will no doubt expedite this online spending growth.
Australians already show a willingness to shop online. Nielsen research shows that Amazon’s U.S. site converts almost one-in-two (49%) Australian visitors into sales - the fourth highest behind eBay (78%), The Book Depository (74%) and The Iconic (53%). Excitement around Amazon’s imminent arrival on Australian shores is also ramping up with 75% of Australians aged 18+ saying they are interested in Amazon Australia; while 56% say they are likely to purchase from its Australian site; and 45% saying they would pay to become an Amazon Prime member to receive special deals, discounts and delivery perks.
So what categories are they likely to purchase? Nielsen’s 2016 Global Connected Commerce Report showed that consumers tend to purchase durable categories, such as fashion, travel and books, music and stationery online with over 50% of respondents saying they have done so. When it comes to consumables, medicine or health care products rank noticeably further down with only 23% of consumers saying they have ever purchased these products online. Consumers do, however, show some appetite for online purchasing of beauty and personal care categories with 38% saying they have purchased these products online in the past.
A survey of Australian households uncovered similar findings with categories such as disposable nappies, baby food and health and beauty skin care ranking high on the list of categories purchased by online shoppers. In contrast, categories such as medicinal pharmacy, cough liquids, cold tablets and capsules, oral analgesics and first aid dressings ranked amongst the lowest. Therefore, community pharmacies that have a greater dependence on these core categories to drive sales will be somewhat insulated from the impact of Amazon.
Looking ahead, Amazon will likely reach a critical mass of third party sellers within 12 months of entry into Australia. Five years from entry, Amazon is expected to reach at least a 5% market share in many categories, including pharmacy.
Even if the threat to the pharmacy channel is not as immediate as it might be to other channels, now is the time for local pharmacy and health and beauty retailers to understand and plan for the impact of Amazon Australia to their categories. The arrival of Amazon also highlights the need to understand your customers, optimise your current online offering and ensure you are providing your customers with a great in-store experience. Now is the time to capitalise on the trust and relationship you’ve built with your customers.
The comprehensive report is an in-depth analysis on Australian consumers’ current online shopping behaviours and the awareness and intentions when Amazon launches a local site. The report investigates specific categories including electronics, groceries, books/music/videos and online department stores.