The online supermarket war is ramping up, as Woolworths expresses concern over suppliers offering cheaper prices to Amazon.
Popular supermarket brands could soon be removed from Woolworths’ shelves, as the company tells the AFR that it will be contacting suppliers in the New Year, requesting they explain their decision to lower wholesale prices for Amazon, leaving long-standing Aussie supermarkets out in the cold.
Since Amazon Australia entered the local $100 billion food and grocery market, Woolworths has reportedly noticed a big difference in prices, with cheaper price points on a number of popular brands, including Colgate and Huggies. The online juggernaut, it seems, is selling pantry goods for as much as 50 percent less than local supermarket chains.
For instance, Colgate Total toothpaste retails for $7 at Woolworths and Coles, but only costs $3.50 on Amazon.com.au.
Under the Australian Food and Grocery Code of Conduct, retailers, can’t simply remove brands from their shelves with no explanation. However, if sales of the brands in question drop below a certain threshold, Woolworths, and its main local competitors, will be within their rights to replace the brands with competing ones or private label goods. However, retailers will need to provide suppliers with written notice, outlining the issue at hand before any steps can be taken to retaliate against the growing price war and discounting pressure in Australian supermarkets.
The decision to offer Amazon lower prices on grocery lines is a risky one for suppliers, with Amazon currently only holding a one percent share of the local market, compared to Woolworths and Coles that have a combined share of 69 percent, or 85 percent of the online grocery market. Although, it is worth noting that recent research by Nielsen has revealed that Amazon’s stake in the market has grown substantially since launching its dry food and pantry goods range earlier in the year. Nielsen also believes that Amazon’s entrance in the local market could pose a bigger threat than many spectators originally thought.
“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 now has upwards of 2500 grocery products on its local marketplace, with cheaper prices on items like Milo, Kellogg’s cereals and Omo washing powder. Other items, like Arnott’s Tim Tams, however, are being sold for the exact same price as its local competitors, Woolworths and Coles.
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