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'Amazon effect' will boost Aussie adspend

News, 19 June 2017
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SYDNEY: Amazon, the US e-commerce giant, is making arrangements for a full launch in Australia later this year and analysts expect its arrival will boost adspend over the next couple of years.

Dentsu Aegis Network last week released a global adspend forecast, which predicted worldwide year-on-year adspend growth of 3.8% in 2017, rising to 4.3% in 2018.

The global media group also said it expected adspend in Australia to grow by 4.1% to $15.4bn this year, before growing by a further 4.8% in 2018.

A significant reason for the healthy outlook in Australia is the "Amazon effect", which is expected to help drive up advertising expenditure in addition to the spending boost the company is expected to trigger in the retail, food and entertainment sectors.

Simon Ryan, CEO of Dentsu Aegis Network ANZ, told AdNews that the "reverberating effects" of Amazon's debut in Australia have already become evident for retailers.

"Looking at the first five months of the year, there has already been a jump in retail spend. There will definitely be a roll-on effect when Amazon launches, the Amazon effect will be that the retail sector will grow," he said.

"When any industry or market is affected by a new entrant or disruptor, they have to have a strategy to compete against it, but I think in this case it will have a positive effect on adspend," he added.

While the advertising industry will be encouraged by the prospect of Amazon's arrival helping to increase spending this year and into 2018, retailers have spent the past few months watching developments with some foreboding.

However, technology expert David Richards has sought to reassure them, saying that the company's impact – at least on consumer electronics and appliances – is likely to remain marginal for the time being.

Writing for Channel NewsAsia, he forecast that the sheer size of Australia will present Amazon with logistical challenges, especially as Amazon Prime's big selling point in most markets is that it guarantees delivery of ordered goods within 48 hours.

But, he added, retailers in Australia must raise their online game to compete with as formidable an operator as Amazon.

He said some Australian retailers have "online sites [that] are prehistoric and their understanding of digital marketing is in most cases non-existent".

Data sourced from Dentsu Aegis Network, AdNews, Channel NewsAsia; additional content by WARC staff

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