Finance Consumer The battle for online grocery shopping supremacy in Australia is ramping up

The battle for online grocery shopping supremacy in Australia is ramping up

Woolworths' first eStore will feature "state-of-the-art" robotic technology. Photo: Takeoff Technologies
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The future of grocery shopping is getting closer, with Woolworths this week starting work on its first Australian ‘eStore’.

The 2400-square-metre facility will adjoin an existing supermarket in the Melbourne suburb of Carrum Downs and will feature “state-of-the-art automated picking technology” to help “keep pace with strong demand for online orders in a key growth corridor”, the company said.

“Our customers will only continue to look for faster and more flexible delivery options in the future,” Woolworths eCommerce director Annette Karantoni said.

“We believe smart fulfilment through our local store network is key to delivering this.”

The move comes as world’s richest man Jeff Bezos’ Amazon empire continues to expand its Australian offerings.

Amazon has found success with robot-run warehouses, and Woolworths is following suit.

It is only a matter of time before Amazon offer food products “that will compete directly with the supermarkets”, said Brent Coker, a lecturer in marketing at the University of Melbourne with a PhD in electronic commerce.

Although Coles and Woolworths have the “first-mover advantage” in the battle for online grocery shopping supremacy in Australia, they “definitely need to dig their heels in and claim their land because Amazon are extremely well resourced”, Dr Coker said.

Reliability of delivery, speed and cost will be “critical parts of remaining competitive in this space”.

“Amazon in the US are really trying to nail this. Same-day delivery is not unusual over there,” Dr Coker said.

Online food grocery shopping is growing “substantially faster than other online channels”, but is still in its infancy in Australia, Queensland University of Technology retail and marketing expert Gary Mortimer said.

About 98 cents of every dollar spent on groceries is still being spent inside supermarkets rather than online, he said.

“Both Coles and Woolworths indicated that their online channels were growing at in excess of 30 per cent … but we do recognise online food and groceries are coming off a very low pace,” Professor Mortimer said.

The supermarket duopoly, which together commands more than 60 per cent market share, is well placed to remain dominant as online grocery shopping grows in popularity, Professor Mortimer said.

British supermarket giant Ocado’s robotic warehouses are set to shake-up Coles’ grocery deliveries. Photo: Ocado

But the supermarkets are approaching the online challenge differently, with Woolworths opting for a “decentralised approach” that will see smaller “micro-fulfilment centres” added to existing stores.

“Taking a decentralised approach enables you to get closer to your market, so you can expedite delivery to that market,” Professor Mortimer said.

By contrast, Coles is pursuing a centralised approach through a $150 million deal with British online supermarket Ocado that will see robot-run fulfilment centres built outside Sydney and Melbourne by 2023, a move Coles says will double its home delivery capacity.

“Coles and Woolworths realise there isn’t a lot of product differentiation between both brands,” Professor Mortimer said.
The format of the supermarkets look essentially the same. But online is a place where they can compete.’’

Online shopping won’t kill bricks-and-mortar supermarkets

Bricks-and-mortar supermarkets will be transformed, but won’t disappear, as consumers buy more of their groceries online, Dr Coker said.

Instead, consumers in the future are likely to shop for non-perishable groceries online and visit supermarkets to buy fresh produce.

People “do enjoy the act of shopping”, Dr Coker said.

“The US has stores like Trader Joe’s and Whole Foods supermarkets that are an experience. People want to go to these places,” he said.
“If it’s a dingy old supermarket with trolleys with squeaky wheels, people don’t really enjoy that.
“But if it’s an experience like what they have in the US now, which I hope is where it’s going to end up in Australia, people want to go to those places.”

Costco, Bunnings go online

Even retailers that have made their name as large warehouse-style stores are moving online to stave off the threat of Amazon.

Amazon is trying to cut Bunnings’ grass. Photo: Amazon Australia

Earlier this month, bulk-buy powerhouse Costco entered the online marketplace, offering its members the chance to buy a reduced range of products online, at slightly higher prices than in store.

Home and hardware behemoth Bunnings has also expanded its online offerings, launching an Amazon-style shopping platform called MarketLink in December.

Bunnings managing director Mike Schneider said the retailer is aiming to offer “everything from the front gate to the back fence”, with the Amazon-style marketplace allowing Bunnings shoppers to buy products directly from “trusted third-party sellers”.

MarketLink’s debut followed an attempt by Amazon to muscle in on Bunnings’ turf with the launch of a ‘garden store‘ selling outdoor furniture, barbecues, and garden equipment in September.

“Our garden store adds to the over 125 million products already available on, underscored by great value and fast delivery,” Amazon Australia manager Rocco Braeuniger said.

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