Australia’s biggest online retailer, Kogan.com, has entered the growing online grocery market with a service promising to have groceries delivered to your door for less.
By Hailey Settineri.
“The more efficient we can be as a business, the more savings that are available to pass on to the customer.”
Kogan Pantry launched on January with around 600 products from trusted brands available at heavily discounted prices – some more than 80 per cent off RRP.
Among the offers available at time of launch were Finish 20pk Quantum Powerball Dishwashing Tablets Ultra Shine for $8.90, Gillette Mach3 Razor for $3.95, and Sun Rice Long Grain Rice 500g (2x pack – 1kg) for $1.57. Shipping is capped at $9.99.
More than 100,000 products were sold in Kogan Pantry’s first weekend of trading and more than 20 per cent of purchases during this period were first-time visitors to Kogan.com.
As Kogan has done with many other categories, it is cutting out the middlemen to ensure supply-chain efficiency and the absolute lowest prices possible.
Kogan Executive Director David Shafer said it was an exciting expansion for the company and a great win for Australian shoppers.
“We are bringing our years of experience in online shopping to grocery and pantry items, delivering Australians amazing prices well below average retail prices,” he said.
“Kogan.com is famous for quality products at massive discounts and our aim is to bring those same savings to a core range of everyday household items and non-perishable groceries.”
Kogan first dipped its toes in the online grocery waters a little over a year ago with a series of bulk offers, including Finish dishwashing tablets. Mr Shafer said the response from the community was very strong in response to those lines.
“We thought to ourselves, the pantry department or category generally is ripe for the picking, given the fact that the market in Australia is dominated by two incumbents and both operate on significant product margins when compared to their international peers,” he said.
“Given the fact that the initial response on certain lines from our customer base was very strong and given the industry dynamics generally, it appeared to us to be a very attractive market to enter.”
Kogan Pantry launched with around 600 products as a core range and is looking to expand that to around 1,500 products in the coming months.
Mr Shafer said the range will broaden, but Kogan Pantry is not aiming to compete with supermarkets in terms of the breadth of their offering.
“Supermarkets can offer upwards of tens of thousands of products,” he told Retail World. “We see part of our efficiency as remaining lean and it has efficiencies in the back end of our operations as well, in terms of how much time and effort it takes to pick and pack a particular order. The more efficient we can be as a business, the more savings that are available to pass on to the customer. As a result we fully intend to retain a core offer in super–discounted products, rather than having a much broader offering with more mediocre discounts.”
The Kogan Pantry range comprises food bargains, health and beauty, pet food, toiletries, confectionery and cleaning supplies. At this stage, the retailer is sticking to non-perishables due to the efficiencies in handling such products throughout the supply chain.
“It means we can warehouse them, we can store them for longer and we can source internationally as well,” Mr Shafer said.
As with the other parts of the Kogan business, products are often sourced internationally in order to provide consumers with the best prices.
“We scour the world to see where’s the best place to source a certain product,” Mr Shafer said. “We’ll go locally if the price and quality of local suppliers meets international levels. If it doesn’t, we’ll go offshore and import directly.
“The ultimate goal of our business is to deliver the customer the absolute best price. In a lot of cases it means we have to do additional work looking throughout the world to see where’s the best price available and where’s the best supplier available.
“Often, doing that work means that you can deliver the customer a significant saving over people who just source through one medium, whether it be through local suppliers or official arrangements with big international brands. All products sold at Kogan Pantry, whether sourced locally or internationally, comply with all Australian standards”
Kogan’s grocery offer is stored and picked from a new warehouse, separate to the warehouses that Kogan uses for the other parts of its business. Mr Shafer said picking a supermarket or grocery style order is a totally different type of picking arrangement in the warehouse than Kogan had experienced in the past.
“Rather than picking one or two items per cart, this is an average of 20-30 items per cart,” he told Retail World. “Picking involves going through a warehouse like you would a supermarket – up and down aisles, filling a box.
“We’ve had to set up a new warehouse arrangement for this and it’s an entirely new premises and type of picking. It has resulted in a different type of supply chain and logistics arrangement, but every business unit is different and we have to respond to the challenges of each business.”
The warehouse, based in Sydney, services orders placed Australia-wide.
A key challenge for Kogan will be in maintaining speedy delivery as interest in the grocery offer grows.
“We’ve been overwhelmed with the response at launch,” he said. “We’ve got a challenge ahead of us to ensure we maintain quick dispatch and also maintain a growing and vibrant product mix to make sure that people have the right incentives to keep coming back. We need to keep delivering on our promise to deliver steep discounts on core non-perishable items that every household needs.”
