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Kmart, Target downplay threat from Amazon

Amazon’s arrival in Australia will not be the Armageddon for established retailers some are portraying, says the man in charge of Kmart and Target.

The two discount retailers are owned by Wesfarmers, which on Wednesday defended the competitiveness of its department stores during a company strategy day for investors and analysts.

A recent Morgan Stanley report warned Wesfarmers could lose $400 million in annual earnings to Amazon by the 2026 financial year, due to the vulnerability of Kmart and Target to competition from the online retail giant.

Wesfarmers’ department store chief Guy Russo told investors on Wednesday he was confident in the current strategies for Kmart and Target, although he conceded turning around the performance of Target, which made a loss in 2015/16, remains a challenge.

“It feels like Amargeddon is coming the way we talk about Amazon,” he joked.

Outgoing Wesfarmers chief executive Richard Goyder said the company was experienced in handling new competition, as seen with its Coles business growing its market share despite the expansion of Aldi since 2001.

“Sometimes it’s easy to look at new competition and say the world is coming to an end,” Goyder said.

Kmart managing director Ian Bailey said Kmart will incrementally improve its online offering and click and collect service, but he does not expect to beat Amazon on what it does best: deliveries.

“Price will continue to be our lead strategy and in terms of Amazon, we want to be the same price or lower,” he said.

Russo added that the group’s online click and collect customers often spend three times more than a typical in-store customer, as they pick up extra items when they come into the store to collect their item.


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