U.S. internet giant Amazon launched in Australia yesterday just in time for Christmas, with retailers scrambling to cut costs and boost their online offerings as they brace for an expected shake-up in the sector.

The arrival of the behemoth - which has grown from an online bookstore to one of the world's largest firms - poses a threat to a market already grappling with weak consumer confidence amid tepid wage growth. The American giant is offering "millions" of products from well-known Australian brands, as well as small and medium-sized Australian businesses selling on Amazon Marketplace.

They will be shipped from a warehouse in Melbourne. Online shopping only accounts for between 8-13 percent of total sales in Australia, leaving room for growth in a sector estimated to be worth more than AU$300 billion ($227 billion) annually.

Retail categories most likely to be hurt by Amazon's entry include electrical, appliances, apparel and cosmetics. The U.S. firm was likely to absorb losses initially to boost its market share, IBISWorld senior analyst Kim Do said, pressuring the profitability and margins of its competitors. Several top Australian retailers have recently succumbed to the pressure of foreign giants, such as Japan's Uniqlo and Sephora of France, while others have cut back on their brick-and-mortar stores.