Woolworths converts Melbourne stores to online delivery hubs

Woolworths will temporarily convert its Dandenong Plaza, Watergardens South and Mountain Gate supermarkets into online delivery hubs as Melbourne enters stage 4 restrictions.

The stores will close to in-store customers to solely serve online grocery delivery customers until further notice.

The conversions will enable Woolworths to pick and dispatch more online orders to customers in the surrounding suburbs. This includes online orders for the most vulnerable in the community through Woolworths’ Priority Assistance service.

During March and April Woolworths undertook similar conversions in a small number of stores in Sydney and Melbourne to meet online demand and service customers staying at home in line with government restrictions during the early stages of the pandemic.

The three stores have been carefully picked to minimise the impact on local shoppers and have the following alternative stores within five kilometres:

  • Dandenong Plaza: Dandenong South and Endeavour Hills
  • Watergardens South: Watergardens, Watervale and Taylors Lakes
  • Mountain Gate: Ferntree Gully, Scoresby and Boronia.

All team members in the three stores will be retained to either pick online orders or work in neighbouring stores. There is no impact on jobs as a consequence of the conversions.

“The demand for online delivery continues to grow at pace with more customers in self-isolation or seeking to limit their outings,” said Woolworths Supermarkets Victorian general manager Andrew Hall.

“This week we’ll be converting three of our Melbourne stores to online delivery hubs to help meet this demand and support the most vulnerable in the community.

“We understand this will be inconvenient for some of our in-store customers and have sought to minimise this as much as we can by converting stores in close proximity to others.

“It’s an uncertain time for many in Melbourne and this will ensure we have the delivery capacity to support the essential grocery needs of many more customers online.”

Melbourne’s newest food retail platform

Newly launched Co-Lab Pantry is an online retail hub offering high-end pantry staples,  meals, drinks and experiences from Victoria’s most-loved restaurants, bars, cafes, brands and producers, to customers nationwide.

Designed as a universal platform for consumers to access Victoria’s best food and drink items, Co-Lab Pantry stocks an extensive range from ready to heat-and-eat meals to restaurant-made condiments, and bottles for the home drinks trolley.A concept born of COVID-19, Co-Lab Pantry was developed by Danielle Lebon, Natasha Buttigieg and Avin Chadee. The three collaborators combined their expertise in retail, hospitality and digital marketing to create an online community focused on ‘Food For Good’, ultimately bringing the hospitality venues and producers they admired together in one retail space during lockdown.

“We realised there weren’t any online platforms which brought together a variety of perishable products and pantry staples from the venues and producers we most loved. Food and hospitality are very close to our hearts and we wanted to create a space that can continue to celebrate and support the relationships customers have with their favourite venues across Victoria,” says Co-Lab Pantry co-founder Danielle Lebon.

Coles online celebrates 20 years

Coles has marked two decades of online shopping in Australia, starting from a single Melbourne warehouse to become a $1 billion business leading the market in adoption of game-changing retail and logistics technology.

Coles Online launched in 1999, just a few years after dial-up internet connections became widely available to Australian homes and almost a decade before the first smartphones hit the market.

At the time, online shopping was still in its infancy, with fewer than 5 per cent of all Australian adults using the internet to make a purchase or order goods or services that year*.

At launch in June 1999, Coles Online offered delivery services to just 23 postcodes in Melbourne, operating out of a single pick-and-pack warehouse in Clayton, with some items also sourced from Coles Springvale. A trial commenced in Sydney the following December.

Brian Donald, one of Coles Online’s longest serving team members, delivered customer orders in the program’s early days and said the platform has come a long way.

“The website was almost just a list and you had to tick the items you wanted,” he said.

“Everyone paid via eftpos on the doorstep because no one would pay online via the internet back then. So most people were sort of waiting with trepidation about what they were going to get and it was a really new and surprising experience.”

By 2002, Coles Online was delivering 1 million items per month to customers, and in 2003 the business doubled in size with the acquisition of Shopfast, which at the time was Australia’s largest online grocery site.

Coles Online also outsourced picking, packing and delivery to Australia Post in 2003 – a sharp contrast to today, with Coles team members handling all aspects of order fulfilment from stores across the country and using Coles Online’s own fleet of 650 delivery vans to bring orders direct to customers’ kitchen benchtops.

By 2008 Coles Online had expanded to Queensland, and the following year launched in Western Australia and South Australia – two more stepping-stones on the way to the current delivery service which covers 80 per cent of Australian homes.

The first Click&Collect lockers appeared in 2009. By 2015, Click&Collect was available at 120 sites, and has now grown to more than 1000 collection points including Coles supermarkets, Coles Express sites and Click & Collect lockers, accounting for around 30 per cent of customer orders.

With annualised revenue passing $1billion this financial year, Coles Online General Manager Karen Donaldson said the business was now setting the foundations for future growth through a partnership with the UK’s Ocado Group, the world’s leading online grocery platform.

“Coles Online has changed enormously over the past 20 years, and that pace is only going to accelerate,” she said.

“As part of our Smarter Selling strategy, Coles is increasing our use of technology to improve efficiency and enable us to keep pace with rapidly-evolving customer needs. Ocado’s automated fulfilment technology and home delivery solution will ensure that we deliver a best-in-class customer experience,” she said.

Ocado will construct two automated fulfilment centres in Sydney and Melbourne by FY2023, providing greater range and availability, improved freshness, more delivery slots for customers and the world’s leading online grocery website platform.

“Coles has been a great Australian retailer for 105 years, and our partnership with Ocado is part of ensuring the sustainability of our business so we continue to win together with our customers, team members and suppliers in our second century,” Ms Donaldson said.

Brian, now Coles Online’s Business Process and Improvement Manager, has moved from delivering orders himself to developing an efficiency program to minimise the distance travelled by Coles Online vans – allowing for quicker delivery, lower costs and fewer emissions.

The growth of Coles Online over the past 20 years has not just provided Brian with a career – it’s also played a role in his family.

Brian first met his wife Jasmin met while the pair both worked at the Clayton warehouse. Today, they have two children: Paige, 6, and Archer,1.

Coles Online celebrated their arrival of both children in the most fitting way possible, naming Coles Online vans after each of them.

AmazonFresh concerns overplayed by food industry – research

Recent research by IBISWorld indicates that concerns relating to the impending entry of AmazonFresh in 2018 have been overplayed in the Australian Supermarkets and Grocery Stores industry. IBISWorld’s analysis suggests that traditional bricks-and-mortar and online grocery players will not be as severely affected by Amazon as operators in other retailing industries.

“While AmazonFresh will offer competitive pricing and use the latest technology, the effect on the major supermarket players will likely be mild compared with disruptions in other retailing industries, particularly in the short to medium term,” said Nathan Cloutman, IBISWorld Senior Industry Analyst.

The Supermarkets and Grocery Stores industry is expected to generate revenue of $108 billion in 2017-18. In the industry, online shopping represents an estimated 2.8 per cent of revenue, at $3 billion. While the Online Grocery Sales industry is growing rapidly, it is expected to only account for 4.3 per cent of total supermarket and grocery sales in 2022-23.

“Online shopping penetration is much lower in Australia than in other countries where Amazon has launched its grocery service. In the United States and the United Kingdom, online grocery sales account for approximately 6% of total sales. Australia’s abundance of bricks-and-mortar supermarkets allows most consumers to purchase groceries quickly and easily instore,” said Cloutman.

“Coles and Woolworths have the advantage of having many physical locations close to consumers. In addition, the major supermarkets already have the scale and logistical strength to expand their online capabilities through options such as click-and-collect. Coles and Woolworths are increasingly expanding their online presence in anticipation of Amazon’s arrival. For example, Coles opened its first online-only dark store in inner-city Melbourne in June 2016 and IBISWorld expects more of these to be opened over the next five years,” said  Cloutman.

Coles and Woolworths currently dominate the Online Grocery Sales industry. Revenue generated through online grocery sales is projected to total $1.3 billion for Woolworths and $1.1 billion for Coles in 2017-18. While ALDI does not sell groceries online from its website, its move to sell groceries online in China through the Tmall platform earlier this year indicates that the company recognises the growth potential in online grocery sales. The company also sells wine and non-food lines online through its website in a range of countries, such as the United Kingdom and Germany.

Amazon will have to overcome the established logistics and delivery networks operated by Wesfarmers and Woolworths, coupled with the already low prices offered by ALDI, to significantly penetrate the Australian grocery market. In addition, consumers often prefer to inspect fresh produce before purchasing, which benefits the major supermarkets. Coles and Woolworths are also enhancing the shopping experience for consumers through add-ons such as instore tastings and cooking demonstrations.

“One year on from starting in the fiercely competitive British grocery sector, Amazon has yet to make its mark. This is another positive sign for the major supermarkets in Australia. However, Amazon could use their large purchasing power to acquire a grocery chain and establish an offline presence in Australia, similar to what they did with Whole Foods in the United States,” concluded  Cloutman.

AmazonFresh is unlikely to launch in the New Zealand market in the near future, due to the relatively small size of the New Zealand industry compared with Australia. The Supermarkets, Grocery Stores and Convenience Stores in New Zealand is expected to total NZD$18.7 billion, which is equivalent to approximately 17 per cent of the Australian industry when converted to Australian dollars.


Online grocery store heads to Sydney to compete with supermarket giants

NSW shoppers now have an online alternative to Coles and Woolworths, with The General Store now open for business.

The General Store is an online-only supermarket developed by the team behind Aussie Farmers Direct, carrying over 4,000 grocery brands. It promises low prices and hundreds of specials and ‘bulk buys’ not available in supermarkets.

The range complements the hundreds of fresh produce lines sold through Aussie Farmers Direct, and gives customers an online alternative to Australia’s supermarket duopoly.

The NSW launch of The General Store is the next stage of a planned national store rollout, following its successful debut in Victoria. Aussie Farmers Direct CEO Keith Louie said thousands of Victorian shoppers were now switching from the supermarkets and getting all their fresh produce and grocery lines delivered to their door.

“We’ve been thrilled with the response to The General Store in Victoria. Our customers have loved being able to add all their grocery and household needs to their regular Aussie Farmers Direct order, saving themselves a trip to the supermarket,” Louie said.

He said that the online store will make it easy for customers to make informed purchasing decisions, with shoppers being able to sort products in an ‘Australian first’ order.

“In The General Store, we will look wherever possible to support Australian food and grocery manufacturers, and we’ll also donate 10% of the profits from imported products to the Aussie Farmers Foundation, which supports charities and grassroots community groups making a real difference in rural Australia,” Louie said.

He said the combined offers gave Australian food and grocery manufacturers an alternative path to market that bypasses Coles and Woolworths, and gave prominence to Australian-grown and Australian-made products.

Coles trials first online-only ‘dark store’

Supermarket giant Coles is trialling a ‘dark store’ with no customers and only employees picking stock for online customers.

The SMH reports that the store, which is located in the Melbourne suburb of Richmond, began operating in April. It delivers goods to customers living within a five kilometre radius of the inner city suburb.

“We are testing to see if we can get volume through a small-scale picking and delivery operation,” Coles boss John Durkan (pictured) said at a Wesfarmers strategy briefing on Wednesday.

Coles plans to open one or two more dark stores in an effort to find out if such operations improve the efficiency of online shopping (which is becoming more popular).

“The only way I can see it working is in high-density locations where you get the volume from a small-scale picking operation, not interrupting either our customers or team members,” Durkan added.

“The Melbourne store serves the CBD and high-density apartment living, but doesn’t have a huge reach in terms of geography.”

In other words, the concept would not suit Australia’s sprawling suburbs.

At yesterday’s briefing, Durkan also warned that the current low prices consumers are currently paying for a range of fruit and vegetables may not last long.

“What we have seen in the last quarter is unprecedented growing conditions in Australia, in particular in bananas,” he said.

“The natural supply and demand is driving prices down. That will subside. I don’t know how many weeks it’ll take, but it will subside.”


Australia lagging behind online grocery shopping

Just 12% of Australian consumers use e-commerce services to order groceries online and have it delivered to their home – 13 percentage points lower than the global average of 25%, and well behind the Asia Pacific average of 37%, according to the latest Nielsen Global E-commerce and New Retail Report. Despite this, more than half (55%) of Australian consumers say online order and delivery is a service they are willing to use.

An even smaller number of consumers are using the “Click & Collect” services that retailers like Coles and Woolworths readily offer for grocery purchases. Just 5% of Australian consumers say they order groceries online and pick them up using a drive-thru service. However, more than half (53%) are willing to use this option in the future.
“The Australian landscape and lifestyle is more complex to other markets, with many consumers living a reasonable distance from retail stores and many not being at home to accept grocery deliveries,” said Megan Treston, a Director in Nielsen’s Retail Industry Group. 

“Advances in technology are providing greater flexibility for shoppers, and offers like click and collect and, more recently, bundles to overcome individual delivery fees are introducing new ways to overcome barriers for online grocery shopping. The delivery fee bundling offer is very exciting and we’re watching this space closely.”
Nielsen’s Homescan Shopper Panel data shows that online represented 1.9% of all grocery sales in Australia for the year ending 13 June 2015, and growth is substantial; up by 29.3% for the year.  
There is a similar trend to growth in online grocery shopping when looking at dollar growth by key department (see below); signaling that online is vital to boosting growth in a relatively stagnant grocery market. The exception to this is Health and Beauty, which is a high involvement category and also faces intense competition from the likes of department stores, pharmacies and other online beauty retailers.
Treston says: “The retailers who will win the most of this prize are those that will leverage technology to enhance the existing shopping experience and meet consumers’ evolving desires with a trustworthy service and by offering real convenience. Consumers are ready for it, so retailers should meet that openness to technology.
 “As smartphone ownership and usage reaches saturation point in Australia, mobile commerce opportunities will also thrive and contribute to strong growth of digital grocery sales. We recently predicted the online channel will be responsible for over $1 billion of sales growth the industry is likely to see over the next five years, and this research shows an existing appetite that is waiting to be nurtured if consumer needs are accurately met, “said Treston.
“Retailers and manufacturers can add value by providing digital tools to help consumers take control of their shopping experience while also increasing sales potential. Mobile in particular can tip the scales in favour of increased shopper control, empowering them to shape the shopping experience more than ever before. Introducing digital strategies into the in-store experience is not just a nice-to-have—these options can increase dwell time, engagement levels, basket size and shopper satisfaction,” she said.