Amazon's Australian kindling

The influence of Kindle sales on Amazon’s Australian ambitions should not be underestimated by our retailers or the cloud computing sector.

In amongst the sea of Apple iPad’s you see tucked under the arm of status-conscious executives around Australia, it’s rare to see an Amazon Kindle.

But the influence of Kindle sales on Amazon’s ambitions for Australia should not be underestimated by our already threatened retail sector, nor our embryonic cloud computing industry.

Amazon is spending heavily on expansion into new regions and categories, so much so that it shocked the market yesterday with a profit warning that sent its shares down by more than eight  per cent.

The online retail giant said the warning reflected the investments it is making, which will extend into the next quarter. These include new retail fulfilment centres, content for its media businesses, and infrastructure for its cloud services business.

Sales of its Kindle devices, including cheaper e-readers, jumped 177 per cent over the nine-week holiday period ending December 31, versus the same period a year earlier. And while it’s been reported Amazon makes a loss on many of the Kindle devices it sells, it’s the content business that will be the real money earner.

Sales by Amazon’s Worldwide Media division grew 15 per cent during the fourth quarter, to $US6.01 billion.

Amazon says customers downloaded more apps from its Appstore during the fourth quarter than they had during all previous quarters combined, and the number of videos purchased or rented from Amazon Instant Video more than doubled year-on-year in the fourth quarter.

It’s a recipe for confidence from Amazon as it looks to expand its horizons.

Asia, and Australia feature in those plans, with Amazon revealing last year it will take on at least one Australian data centre in Sydney. Analysts are now also predicting Amazon may set up a local retail site, backed by a new fulfilment centre similar to that planned for India.

Property in Australia remains a major talking point, particularly for the retail sector which is suffering from the transition to digital.

Amazon can leverage its expensive physical presence with multiple product lines – if it’s going to make a large investment inAustraliait would make sense for the group to look at large commercial property sites with the potential to serve both its cloud services and retail business.

Australian retailers could be left running scared if Amazon steps up its presence here.

The retail giant won few friends in the struggling American retail sector when it launched its PriceCheck mobile app last year that lets users compare prices on merchandise at offline retailers, with its own usually cheaper prices, and then threw in a $US15 credit to help lure users away from stores.

At the same time, Macquarie Telecom, Ninefold and even Salesforce would have to be concerned about Amazon’s impending Australian data centre since offshore data storage issues are the only thing holding back Australia’s largest corporations from embracing true cloud computing.

The myriad vendors selling private clouds to the big end of town might also have to rethink their strategy if Amazon strolls into town.

They’ll all be hoping those millions of Kindles sold don’t turn into billions of dollars in content revenue to help drive a global assault Apple-watchers are all too familiar with.