FoodPro / AIFST Convention 2017

It’s a case of when, not if, grocery e-commerce will start to soar in Australia

By Gary Scattergood contact

- Last updated on GMT

It’s a case of when, not if, grocery e-commerce will start to soar in Australia

Related tags: Online shopping

Australia is primed for e-commerce food sales to take off – but the big question that remains is which outfits are prepared to pump in the investment to make it possible?

The nation’s two major supermarkets, Coles and Woolworths, have offered online shopping since the late 1990s.

But their business model is still largely based on store fulfillment, whereby staff collect products from the supermarket shelves to be dispatched to shoppers.

In the UK and US, by comparison, the likes of Ocado and Amazon have central fulfillment offers, which generally enable greater discounts to be passed on to consumers, and orders to be dispatched more quickly.

Amazon is set to launch in Australia later this year, but food products are unlikely to available in the short term.

“The Australian market is appealing to prospective online grocery businesses, but it really comes down to who is willing to invest,” ​said Glenn Radford from Play Market Research.

“Internet and smartphone use means Australia is ready for this…but there is not yet the central fulfillment offers we see in the UK where Ocado gives 20% off your first shop. The best you can get from Coles and Woolworths is free delivery because they don’t want to cannibalise their core business.”

Online grocery sales in Australia are lagging behind many other developed markets. Although it represents the third biggest category, last year it grew by just 2.8%. Takeaway food on the other hand, soared by 34%.

In the UK online grocery sales account for 5.8% of the total, while in Australia it is 2.3%.

Speaking at the Australian Institute of Science and Technology (AIFST) convention in Sydney, Radford and his colleague Rebecca Alexander-Head conceded there were some obvious hurdles to e-commerce growth in Australia.

Page loading woes

The size and of the country and the spread of its population might mean that national schemes may not always be effective, but they suggested Melbourne and Sydney would be smart starting locations.

Another potential problem is that Australia has some of poorest internet page loading times internationally.

“A family shop might include 50-70 items which can mean page load times can create an awful customer experience,”​ said Radford.

These challenges aside, he added consumer expectations meant the rise of grocery e-commerce was inevitable.

“In 2015 Australian’s saw fast delivery as three to four days,”​ he said. “By 2016 that was two days and today expectations are growing as localised delivery services like UberEats raise the game.

“In a market where two grocers have largely run the show for 20 years, omnichannel retailing is coming and it will be good for the consumer.

“In 10 years’ time I imaging heading home with my online retailer having delivered what I need that evening based on what it knows is already in my fridge.”

Related topics: Markets, Oceania, Industry growth

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