Australia's grocers urged to invest in online segment fast

Many grocers who did not take the plunge before the pandemic lost market share.

Australia’s grocers are urged to get involved in understanding what investing in online grocery can mean for their business, as innovation is expected to speed up over the next few years and those that sit still are bound to be left behind, according to a report from IGD.

Innovation in the online grocery segment is expected to be even faster over the next few years as retailers look to grow market share, but also balance the bottom line.

“Those who didn't take the plunge before the pandemic have lost significant market share as record numbers of shoppers turned to the channel,” IGD’s head of insight for Asia Pacific, Nick Miles commented.

Meanwhile, many retailers who have managed to ramp up capacity over the past 12 months have delighted shoppers and will likely reap the benefits of their loyalty for many years to come, the report said.

Some have held firm and still not invested, whilst grocers such as Metcash have rapidly launched new services and brought them to market. “In fact, Metcash was lucky as its stores also benefited from the huge shift of people shopping closer to home,” Miles said.

IGD noted that retailers are getting smarter at leveraging the models they have at their disposal to make online grocery more profitable.

“Although there is some way to go, tactics we see include, rolling out the right fulfillment models to the right locations, creating great omnichannel experiences through making stores work seamlessly with online, new partnerships to fast track innovation, greater levels of automation to cut labour costs, enhanced delivery planning, sourcing delivery to third party operators and commercialising data and the path to purchase,” Miles added.

With more capacity and more people shopping online for groceries than ever before, online penetration of the channel in Australia is expected to remain elevated post-pandemic. As the market recalibrates and spending shifts back to out of home channels, online will be the main source of revenue growth for the sector over the next two years.

Coles and Woolworths, despite some initial issues, have driven some phenomenal growth through the online channel in the past year, with online food growth in H1 FY 2021 of 48% and 92%, respectively, the report noted.