Woolworths’ Q1 sales have dropped behind its main competitor, Coles for the first time in two years. Online sales have been strong, but the plastic bag ban and Coles’ Little Shop promotion have caused problems for the supermarket chain.
Woolworths revealed a comparable sales growth of 1.8 percent for the 14 weeks leading up to September 30 on Thursday morning. This represents a 4.9 percent drop in growth compared to the same period in 2017.
The company’s main rival in the local market, Coles, reported comparable sales growth of 5.1 percent last month, out-performing Woolworths for the first time in two-years.
“Australian food had a challenging start to the quarter with sales impacted by our customers’ and teams adjustment to the removal of single-use plastic bags, as well as the impact of a competitor continuity program,” Woolworths said in a statement.
It’s believed Coles’ Little Shop Promotion, which attracted an extra 250,000 consumers to its online store earlier in the year, and the controversial ban of single-use plastic bags is behind Woolworths’ slower performance.
While both supermarket giants went ahead with the decision to charge for plastic bags, Coles did offer the bags for free to help ease the transition, after receiving a slew of complaints.
Woolworths’ transactional growth also took a hit, down from 4.6 percent in Q1, 2017 to only 2.1 percent this year. The supermarket’s average basket size also fell by 1.5 percent.
The one shining light for Woolworths over the last quarter was online growth. The company increased its total grocery sales by 1.9 percent over the quarter, with 3.3 percent of that coming from online purchases. In the last 14-weeks, the supermarket’s online grocery sales increased by 26 percent.
Coles also experienced a strong increase in its online grocery sales in Q1, with the company revealing a 30 percent increase in transactions over the last few months. This puts the company on track to achieve its target of $1 billion in online sales in FY19.
However, future growth in the online market could be harder to achieve, with Amazon recently announcing its entrance into the Australian grocery market, launching its first line of pantry food items in October.
“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 in the announcement.
“We are delighted to add to the over 80 million products already available on the store with the launch of Pantry Food and Drinks, bringing greater convenience to customers, underscored by everyday brilliant value and fast delivery.”