Coles is trialling its first online-only dark store in Melbourne with an eye to improving efficiencies in online order fulfilment.
Coles has started testing its first online-only ‘dark store’ in Richmond, Melbourne. The store is staffed with pickers who collect orders for online shoppers.
The idea behind the dark store is to improve the efficiency of fulfilling online orders by giving pickers access to a supermarket that is free of other shoppers.
Coles is currently planning to roll out one or two more of the dark stores to continue testing the strategy.
According to Wesfarmers, which owns Coles, the strategy will likely only suit a few densely populated city areas. The company expects Australia’s spread-out geography and the convenience of suburban shopping will likely mitigate demand for this kind of service.
“We are testing to see if we can get volume through a small-scale picking and delivery operation,” said Coles managing director, John Durkan.
Online grocery shopping has been slow to take off in Australia, especially compared with other markets like the US, Europe or China. Australia’s supermarket duopoly of Woolworths and Coles has so far done little to expedite consumer uptake of online grocery shopping, providing offerings that have received a lukewarm consumer response.
“Online grocery in Australia is really far behind the rest of the world because we have a [supermarket] duopoly that is aware that online grocery is expensive, and has cautiously edged towards it,” Morgan Ranieri, co-founder of YourGrocer, told Power Retail.
“But if you look at the UK, there are four major grocers over there, each looking for ways to differentiate themselves. So we don’t have as much of a competitive landscape here, which means the supermarkets aren’t pushing to differentiate themselves.”
Coles and Woolworths recent internal struggles have been well documented. Externally, they have been losing market share to Aldi, which has been rolling out new stores in South Australia and Western Australia.
Despite the major supermarkets’ tentative moves into the online grocery space, the Aussie online grocery market is heating up. Amazon is reportedly eyeing the Australian market for a launch of its AmazonFresh grocery delivery service.
Smaller independent grocery delivery providers have also benefited from the major supermarkets’ slow move into the space. Two of Australia’s leading online grocers, ShopWings and Grocery Butler, recently merged operations to operate under the single ShopWings brand. The fact that the major supermarkets don’t yet dominate the online space has allowed these more nimble independent players to expand.
Coles’ dark store trial is by no means a significant step into the online space for the supermarket giant. Given the recent struggles that the supermarket majors have faced trying to get their in-store offerings right, it’s hard to imagine either supermarket aggressively pursuing an online offering, let alone nailing it.