Online grocery sales have reportedly risen by 39.7 percent in the last 12-months, as more Aussie shoppers embrace the convenience of online shopping.
New data released by Nielsen has revealed that the value of online grocery shopping in Australia has jumped 39.7 percent year-on-year, while the total grocery market has only grown by 2.7 percent in the 12-months ending October 2018.
According to Nielsen’s quarterly Grocery E-Commerce Report, online groceries have carved out a greater share of the overall market, gaining an extra percentage point to reach a 3.8 percent stake in total grocery dollar sales.
Sales are reportedly led by ‘young transitionals’, which Nielsen defines as households below the age of 35 with no children, who have increased their online grocery spending by 94.4 percent in the last year and spend the most cash online. Other big spenders are shoppers that fall into the ‘small-scale families’ category or households with children aged between six and 11, with online grocery expenditure rising by 44.9 percent.
Not surprisingly, Coles and Woolworths hold the largest market share, representing a combined stake of 85 percent of total online grocery sales. This comes as both Woolworths and Coles have reported a growth in online sales in Q1 FY19. According to Woolworths’ most recent quarterly results, the supermarket chain has increased online sales by 26 percent, with 3.3 percent of the company’s total sales for the 14-week period coming from its digital channels. Similarly, Coles reported a 30 percent growth in online in its Q1 result’s statement, claiming its e-commerce revenue is on track to reach $1 billion in sales in FY19.
However, despite strong growth in the sector by Woolworths and Coles, Nielsen believes Amazon’s decision to start selling pantry goods on its local marketplace could have a bigger impact on the Australian industry than originally suspected.
“The online grocery landscape is likely to continue its rapid growth as Australians get more comfortable with the experience, and certainly as Amazon expands its offering,” says Alfredo Costa, head of retail at Neilsen.
“Household brands from across dry grocery categories, such as biscuits, cereals, and confectionery are now available for purchase via Amazon, as is a range of health and organic items which may attract customers looking for specialty items they may not have seen in their local bricks and mortar stores.
“These weeks leading up to Christmas will undoubtedly see a surge in new shoppers’ trialling online grocery stores for their ‘big shop’ during this busy period,” added Costa.
Amazon Australia announced in mid-October that it would be introducing a selection of dry goods to its local marketplace, with items like tea, coffee and organic health foods among the lines available.
“Since the launch of amazon.com.au in December of last year, we have been focused on growing selection and services for Australian customers,” Rocco Braeuniger, country manager of Amazon Australia said at the time.
Before Amazon launched in Australia, there was a lot of talk around whether the e-commerce juggernaut would move to take a share of Australia’s $100 billion grocery market.
However, according to a report from investment bank, UBS earlier in the year, the high delivery costs in Australia and local supermarkets’ tight relationships with suppliers, when combined with their strong in-store networks would all be tough obstacles for Amazon to overcome.
Nielson, on the other hand, believes Amazon will be quick to catch-up to traditional players in the Australian supermarket space, as consumer awareness of Amazon starts to catch up to awareness of online grocery services from the likes of Woolworths and Coles.
According to a recent survey, 90 percent of respondents were aware of Amazon, with Woolworths Online sitting at 94 percent and Coles Online at 93 percent.
Amazon is also primed to give consumers more options for online grocery shopping, with online dry grocery sales increasing by 48.5 percent in the last year, giving Amazon a chance to tap into an already growing market.
Frozen foods, including ice cream and frozen vegetables, and confectionary are other big online sellers, with a growth of 57 percent in the last 12-months, while products within the health and beauty category remain the best at attracting shoppers to digital platforms. Neilsen attributes this to the simplicity of purchasing everyday essentials like toothpaste and deodorant online.