Amazon is rolling out its Prime subscription service in Australia just weeks ahead of a policy change that will block customers in the country from shopping on its overseas websites in response to a new tax law.
The US ecommerce giant is betting that the offer of free delivery and access to digital videos, music, ebooks and gaming through a A$59 annual Prime membership will prove appealing to Australians, despite the limited selection of goods they will be able to buy from Amazon.
Amazon said last month that from July 1 it would restrict Australian shoppers to purchasing items solely from its Australian website, due to a new law requiring online retailers to collect goods and services tax on all products shipped into the country from abroad.
Amazon’s Australian site carries about 60m items, fewer than other Amazon stores including its US site, which has 500m products for sale, and tends to charge higher prices. There are 4m products from the US available on the Australian site, and Prime members will not have to pay for shipping on those items.
Jamil Ghani, who runs Amazon’s international Prime business, shrugged off concerns that the inability to access international websites would discourage people from signing up. “I’m confident that the combination of fast, free, unlimited domestic shipping on an ever-growing catalogue, plus the access to free and unlimited shipping on the global catalogue from the US, that combination is quite powerful from a shopping and shipping proposition,” he said in an interview.
Australia is Amazon’s 17th market for Prime, which started in 2005 as a US-only scheme offering free two-day shipping on a limited number of items sold directly by Amazon. The programme has expanded to include items sold by third-party merchants and a suite of digital entertainment features.
Amazon does not break down how many Prime members it has in various countries but said this year that it had surpassed 100m subscribers globally.
Analyst Mark Mahaney at RBC Capital Markets said his annual consumer survey on Amazon Prime showed the programme’s growth might have levelled off in the US, where he estimated the company had 70m-75m subscribers. “This implies Amazon’s Prime membership expansion is likely driven by growth in international markets,” he said.
As it moved to make Prime available to customers around the world, Amazon was also taking steps to localise, Mr Ghani said — being mindful to “balance those things that are universal about customers and members and those things that are unique to individual [markets]”.
In the UK and Germany, for example, where customers live closer to Amazon distribution centres, Prime members get free one-day shipping, versus the default of two days in the US. In Japan they can schedule delivery times and charge their Prime membership fees to their mobile phone bills, a common payment method in the country.
Amazon is also investing heavily in video content for Prime, including original television shows and movies in India and Hollywood and live TV channels in the UK, as it competes with Netflix. It is ratcheting up its efforts in live sports, buying rights to show Premier League matches in the UK and NFL matches in the US.
Amazon’s decision in April 2017 to set up a full retail offering in Australia wiped more than A$2bn (US$1.5bn) off the value of the country’s listed retailers in the month that followed. But since its much-hyped December launch, analysts say the ecommerce giant has so far has had a limited impact. “Initial reporting in early 2017 suggested Amazon would ‘decimate Australian retailers’. This certainly hasn’t been the case,” said Gary Mortimer, associate professor at Queensland University of Technology’s business school.