Amazon Fresh faces uphill battle in Australia

AMAZON is facing an uphill battle to take on Coles and Woolworths in the grocery market, if this statistic is anything to go by.

AMAZON is facing an uphill battle to take on Coles and Woolworths in the grocery market according to consumer research firm Roy Morgan.

The e-commerce giant last month finally broke its silence, officially confirming it was preparing to bring its popular retail offerings to Australia, including Amazon Fresh grocery delivery and Amazon Go grocery stores.

But according to Roy Morgan, Aussies have been notoriously slow to embrace online grocery shopping — despite saying they are open to the idea.

“For many years, Roy Morgan Research has tracked Australian grocery buyers’ interest in doing their grocery shopping online and consistently found that while almost 30 per cent say they’d consider it in the next 12 months, only around 3 per cent actually do so in any given four-week period,” Roy Morgan said.

“So despite positive sentiment for the idea, shopping for groceries online still remains niche in Australia. The question is, will the introduction of high-speed grocery delivery service Amazon Fresh change that?”

Woolworths customers were marginally more likely to do their grocery shopping online — with 4.2 per cent doing so in an average four weeks — than those who mainly shop at Coles (4 per cent), Aldi (1.4 per cent) or IGA (1.2 per cent).

But Coles shoppers were more likely to consider doing some of their grocery shopping on the internet in the next 12 months (32.1 per cent) than those who mainly shop at Woolworths (30.6 per cent), Aldi (28.5 per cent) and IGA (19.6 per cent).

Roy Morgan said its recent State of the Nation report highlighted industry trends that would work in the supermarkets’ favour, even once Amazon arrives.

“The longstanding gap between consumers who say they’d shop for groceries online and those who actually do it suggests that immediate mass uptake of Amazon Fresh is unlikely,” it said.

“Australians are making more visits to bricks-and-mortar stores, at least partly due to the growing ‘retailtainment’ trend, whereby their shopping experience is enhanced with an extra entertainment element.

“Savvy supermarkets are already tapping into this with such add-ons as in-store cafes, tastings or cooking demonstrations — something an online grocery service cannot compete with.”

Last year, Coles managing director John Durkan pointed out that Australia was a “completely different market” to the rest of the world. “Outside of relatively small hubs, it’s very convenient to do your shopping in Australia,” he said.

“The density of population and geography allows most people to get to stores very quickly, park, do their shopping and leave. It’s much more efficient for us and our customers to do our shopping in that way.”

Harvey Norman founder Gerry Harvey, who has pledged to “match or beat” Amazon’s prices, has also attempted to play down the US company’s impact, saying it was “so far away” from rolling out its full retail offering.

Roy Morgan chief executive Michele Levine said while online grocery shopping was not yet widespread in Australia, the arrival of Amazon Fresh would “up the ante with its quick-delivery, low-priced service”.

“The threat of AmazonFresh is not just about technology, it’s about competitive pricing, service and real estate,” she said. “With heated price wars already characterising the current Australian supermarket scene, a new player of this magnitude will undoubtedly appeal to grocery shoppers.

“Meanwhile, as traditional supermarkets reduce the range of brands they stock in favour of a greater selection of home brands, the sheer diversity of brands available on AmazonFresh may also appeal to shoppers.

“The incumbents, however, have the advantage of physical locations within easy reach of every shopper. Although Amazon is venturing into the offline space, with its first cashier-less, bricks-and-mortar Amazon Go grocery store currently operating in beta-mode in Seattle, it remains some way off rolling out these stores in Australia.

“This advantage will buffer local supermarkets while they gauge and respond to the impact of AmazonFresh’s arrival.”

The online retail behemoth has annual global sales of more than $133 billion ($US100 billion) and last reported in February a 22 per cent rise in revenue to $58.2 billion ($US43.7 billion) for the fourth quarter.

[e-mail]

Originally published as Amazon Fresh faces uphill battle in Australia