New player in grocery war offers to slash prices

A NEW player has entered the supermarket space offering to slash 50 per cent off your weekly shopping bill. But is it too good to be true?

A NEW player has entered the supermarket war offering to slash 50 per cent off your weekly shopping bill.

Kogan.com, a website known for selling cheap electronics, has expanded into offering online groceries with Kogan Pantry — hoping to cut into the market dominated by Coles and Woolworths.

Non-profit consumer group Choice has backed up the site’s claim, saying the products it compared were about 40 to 50 per cent cheaper than the equivalent product at Coles or Woolies.

So, how do they offer such cheap prices?

Company founder and chief executive officer Ruslan Kogan said the site “cut out as many middle men of the supply chain as possible” to provide their discounts.

Melbourne businessman Ruslan Kogan has expanded his online retail business into the groceries sector. Picture: Jake Nowakowski

“It’s an efficiency play and it’s about selling direct to the consumer,” he said.

Customers have flocked to the site since it launched earlier this month, with it selling 30,000 items in its first six hours of operation.

“We knew there was a lot of negative sentiment around supermarkets in Australia, we knew people didn’t like them very much, but we had no idea to what extent,” Mr Kogan said.

“It feels great when we can take it to the big two.”

Sound too good to be true?

Well, there are a couple of important things customers need to note about Kogan Pantry.

Mr Kogan conceded that the site doesn’t offer the same product range as Coles and Woolworths and it focuses on non-perishables.

Kogan Pantry is offering heavily discounted groceries.

Kogan Pantry offers 500-600 products to choose from, while Coles, for example, has upwards of 15,000. Kogan also doesn’t offer fruit or vegetables.

However, Mr Kogan said the site still offered the “massive brands” customers wanted, such as Dove, Colgate, Palmolive, Pringles, Powerade and Gillette.

Delivery through Kogan is also more expensive, with a fixed shipping rate of $9.99 to anywhere in Australia. It will also take your products longer to arrive. Some products may arrive within a week, while others may take up to three weeks, according to Choice’s research.

It’s also important to note that the products may not be the same as the ones you are used to using. A disclaimer on the site reads: “This product may be an international variation and may differ in some respects from other similar products available from local retailers in various countries around the world.”

Kogan Pantry can’t compete with Coles or Woolworths when it comes to fruit and vegetables. Picture: Jodie Richter

Mr Kogan said he had been interested in trying to break into the industry, which he called a duopoly, for a long time.

A Roy Morgan analysis from found that Coles and Woolworths control 72.5 per cent of Australia’s $82 billion grocery sector, while the former chief executive officer of Kellogs ANZ, Jean-Yves Heude, told news.com.au last year that shoppers probably paid about 3.5 per cent more for groceries due to the dominance of the two main supermarkets in Australia.

“That creates a couple of not great things in the marketplace: higher margins and they can dictate terms with suppliers,” Mr Kogan told news.com.au.

“Neither of those things is good for the consumer.

“They are two very strong, very good businesses, so if you want to compete against them, you’d better make sure you’re doing something right.”

Choice spokesman Tom Godfrey agreed that the site offered big savings.

“The prices are very hard to beat, but it’s a very limited range,” he said.

“You are still going to have to elsewhere for your fruit and veg but, of the products they do have, they are amazingly well priced.”

Online grocery shopping allows customers to avoid the pain of trolleys and carparks.

Mr Godfrey said the entry of Kogan into the sector would likely make customers better off.

“The new online entrant in this space is going to have a disruptive influence and that’s going to cause a lot of innovation and good things to come from Coles and Woolies,” he said.

Mr Godfrey said Kogan offered some great prices, but consumers needed to be aware of its limitations.

“As long as you are happy to pay your $9.99 delivery fee and are happy with the fact that it might take a little longer to arrive, the prices are pretty hard to beat,” he said.

Here are some of Choice’s price comparisons:

● Gillette Mach razor blades | Kogan: $19 or $1.90 each (10 pack); Woolworths: $36.55 or $3.05 each (12 pack)

● Radiant laundry powder (1.5kg) | Kogan: $6.92; Coles: $11

● Tilda Steamed Rice Brown Mushroom (250g) | Kogan: $2.54, Coles: $3.74; Woolworths: $2 (on special)

Read Choice’s full list here.

Consumer group Choice hopes the introduction of Kogan will help to product innovation in the sector.

News.com.au asked Woolworths what it offered customers that Kogan could not.

“Woolworths Online offers the convenience of many thousands of products, including all the brands customers know and fresh fruit and vegetables, delivered right across Australia and at great prices,” a spokesperson said.

“We offer a delivery saver pass where customers can enjoy home delivery for less than $2 a week. We not only deliver but also offer click-and-collect for those customers who want to duck into a store at their convenience. Customers can have products in their homes in as little as 24 hours, or ready to collect in-store in 12 hours.”

Coles declined to comment.

Kogan is a wholly Australian-owned company that employs about 200.