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US Retailers Head to Oz, Shippers Ponder Challenge

How do you deliver products cheaply, efficiently, and competitively to and in a country that spans one of the toughest logistical challenges in the electronics world? US retailers are itching to find out.

Sydney’s The Australian newspaper notes that American office supply retailer Staples, a major IT retailer, has signaled a move into the Southern Pacific with the purchase of Corporate Express, a local electronics vendor.

Staples won’t be the only American competition now facing Officeworks, Australia’s largest retailer for laptops and printers. {complink 11480|Amazon.com Inc.} and Best Buy will follow next year, according to a report in Smart House, a Website that tracks home office technology.

The US move to Australia has its logic: While US consumers remain crisis-wracked, the US and Australian Dollar are trading at nearly one-to-one. A report by business consultants Research and Markets found the Australian IT market would grow 4 percent annually in the next three years, “driven by sales of notebooks and netbooks,” reaching US$16 billion in 2014. Computers and peripherals represented 61 percent of electronics earnings in Australia, according to the same report, with the rest of the buying mostly in flat-screen televisions and mobile telephones.

This is all good news for cheap printer customers in Australia, presumably. But it’s a complicated development for shippers, who now have three of the world’s largest online electronics retailers showing up to do business in an area that’s more than twice as large as India and 80 percent desert. So far, neither Best Buy nor Amazon has hinted who will be carrying Australian purchases, or how exactly a television made by a Japanese or Korean company, manufactured in a Malaysian factory, and distributed by an American retailer, will get to an Australian living room.

It’s probably safe to say that a lot of large, heavy boxes will be hitting the Australian ports and mail service next year, and that shipping across the country is going to be a supply challenge. Staples will be piloting its arrival in relatively urban New South Wales. But at some point, Amazon’s going to have to ship an entire in-home movie theater to a perfectly decent place full of wonderful, paying customers who live in the absolute middle of nowhere.

It’s possible that along with opportunism, there’s a whiff of desperation in the move. While Australian IT customers are showing enthusiasm, they’ll have to buy an awful lot of IT equipment to compensate American retailers for the strain on their supply lines. Ozzie enthusiasm for computers and gadgets is expected to grow about half a percent faster than America’s in the next three years, but the total sales will be barely 5 percent of a predicted $268 billion Americans, even in a flagging market, will be spending on electronics by 2014.

5 comments on “US Retailers Head to Oz, Shippers Ponder Challenge

  1. eemom
    November 29, 2010

    Part of the challenge for American companies is whether they will be able to maintain a competitive edge if they tack on shipping and distribution charges to products that already have low margins.  You bring up an excellent point about the geographical challenges of Australia and it remains to be seen whether American companies will figure out how to solve the problem quickly, efficiently and cost effectively.  The projected growth rate of the market however, may not sustain three additional companies competing in the space, although the Australian consumer might be the one ultimately benefiting from the competition if all three vendors succeed in actually getting their products there.

  2. Marc Herman
    November 29, 2010

    Couldn't agree more. I frankly don't get the math for the vendors: a relatively small population, spread over an enormous amount of land, that is itself at the end of most supply lines. It's not an obvious hub or a way to open up a region. It's conceivably on the way to New Zealand, the various Pacific Island nations, and perhaps — at a stretch — the southern cone of South America. But that's really hard to see as a priority for a retailer used to a 300 million-person market, like the US. Still, the size of the moves so far don't suggest an experiment. What seems likely to me is that the fall of the Dollar was the thing that set the rest of the dominoes in motion. We will, as you say, see if these companies really stay with it over years and into decades. Lowering costs passed on to customers — like shipping fees — seems essential.

    Thanks for your thoughtful comment. Are you, perhaps, in Australia yourself?

  3. eemom
    November 29, 2010

    Actually no, I'm from New Jersey.  It's just the numbers did not make sense to me.  Even if the dollar exchange is favorable, the cost of doing business and adding the shipping and distribution charges have to be painful.  Maybe, as you suggest, Australia will eventually be used as a hub to ship elsewhere but I would have to believe there might have been a better choice…there must be something we don't see.

  4. Backorder
    November 30, 2010

    Surprised to see the growth numbers for this sector! Really, growth at 4% should not be too tempting. And as far as the supply logistics are concerned, isnt that a prorblem in practically all the markets today, with every aspect of the product cycle based in a different location?

  5. Marc Herman
    November 30, 2010

    It's a familiar problem, but in this case, it strikes me as a particularly acute and curious example. The combination of long distances and small markets make the usual challenges more acute, and harder to see as worth confronting. I do wonder if these companies will use Australia as a way into Indonesia, which is a truly massive market, a keen electronics market, and a fast-growing economy. And right next door.

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