Thursday, August 18, 2022

Online grocery latest ‘battleground’ for supermarkets

Online grocery retailing is the latest “battleground” for supermarkets, according to industry research company IBISWorld.

Coles, Woolworths and others are busy ramping up their click and collect services.

IBISWorld predicts the online grocery sales industry to generate $3.3 billion in revenue in 2018-19. Bricks-and-mortar supermarkets will generate $103.4 billion, the research company says.

Supermarkets lagging behind other retailers

IBISWorld Senior Industry Analyst Tom Youl says Aussie consumers have been slower to embrace online supermarket shopping.

“Online sales currently only represent approximately three per cent of total supermarket revenue,” he said.

“In comparison, (general) online retail spending accounted for over eight per cent of traditional brick-and-mortar sales, over the year to June 2018.

“Consumers’ trust in online grocery shopping has taken time to develop. Australian consumers have demonstrated a desire to check the quality of food items before a purchase, particularly for fresh produce. Consumers typically only shop online for low-value and bulky groceries.

“These trends greatly constrained revenue growth, despite a steady rise in the proportion of Australians who purchase groceries online. However, the introduction of click and collect services has opened up the market.”

Looking to the future

Over the five years through 2018-19, predicts IBISWorld, the online grocery sales industry will expand at an annualised 21.7 per cent. This rate compares with 2.1 per cent growth among bricks-and-mortar stores over the same period.

“Click and collect services have driven this expansion by growing consumers’ average expenditure per online shop,” Mr Youl said. “Customers can now check all their items are included and of a sufficient quality, as well as pick up any forgotten items or impulse purchases.”

While click and collect services are not new, IBISWorld says Coles and Woolworths have invested heavily in infrastructure to facilitate these services in recent years. In 2017-18, the two companies added click and collect capabilities to almost 1,400 supermarkets.

Woolies has the edge, but Coles fighting back

As of 2018-19, IBISWorld estimates that Woolworths will hold 45.3 per cent of the online grocery sales industry. Coles, by contrast, will hold 30.9 per cent.

“This edge is partly reflective of consumers’ preference between the two companies,” Mr Youl said. “But Woolworths has also benefited from ‘first mover advantage’ in click and collect store rollouts.

“However, Coles has fought back, responding to consumer demand by introducing a range of click and collect locations. Coles currently offers click and collect in over 1,200 locations, which is about 200 more than Woolworths.

“Click and collect functions have also been added to Coles Express petrol stations, which has increased the company’s footprint within the segment.”

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