Coles keen to tap online potential

Posted by Daniel Palmer on 18th June 2009

Having seen the growth of online grocery shopping in the UK, Coles is hoping the same trend continues gathering pace here in Australia.

Australia’s major supermarket chains have been reluctant to embrace online shopping but it appears that they are steadily warming to the concept. If it has as much potential as analysts in the UK suggest then Coles and Woolworths – given their extensive distribution networks – are in the driver’s seat to expand their already large share of the Australian grocery market.

The major chains, who are currently enhancing their loyalty card schemes, are both well aware of the potential for information gathering by building an online community. Online shoppers present the chains with the knowledge they desire from loyalty cards – that is: who shops for what and when. It also offers opportunities to gain insight by providing incentives to participate in market research but it must pay its way by making a profit.

Coles makes move, Woolies bides time

Coles, of the major players, appears the most enamoured by the online potential and has recently announced that they will be the first major grocery retailer to introduce an online shopping service to Adelaide after being the first to enter the Perth market last month and Brisbane before that. At Wesfarmers’ most recent investor briefing Coles boss Ian McLeod advised that growth in their online sales had been “encouraging” thanks to “resilient and growing demand” with a “profitable and scalable store pick model”.

From humble beginnings in the nation’s two largest cities – Melbourne and Sydney – the two majors have both reached out to the nation’s capital; but that is where Woolworths has stopped – for the time being – while Coles has been following through more swiftly on their plans for a national service. Woolworths maintains that a national offering will eventuate, but when remains a mystery. Last year they said their Homeshop service would enter Queensland for the first time before the end of 2008, but Queensland residents are still waiting. While they recently said an entry into the WA marketplace would take place soon, but the pace of their expansion suggests ‘soon’ might simply mean ‘at some point in the next decade’.

Convenience trend ensures a market

Coles General Manager of Online Shopping, Keith Louie, noted – upon launching the Adelaide service – that the prevailing convenience trend would guarantee robust demand for online grocery shopping.

“Customer interest in online shopping is a sign of the times,” he said. “Many Australians are looking for more convenience and are turning to the internet as a time saving tool. Some also want more visibility and control over their spending. We see online shopping as a simple way to alleviate some of these stresses of everyday life.”

And early indications in Perth have been good, with trade “above expectations”, according to Coles Group spokesman Jim Cooper.

“While we don’t believe online grocery shopping will ever overtake store-based grocery shopping, it is growing in popularity,” Mr Cooper told Perth Now.

Are Australians ready to embrace online grocery shopping?
Growth in online grocery is off a very low base but, with support from major chains, its share of the sector could quickly expand.

Highlighting the difficulties faced, a Deloitte survey of Australians last year discovered that food and groceries were the least likely of 12 categories to be researched over the internet, with only 6% conducting research online as opposed to 94% in-store. As a means of comparison, the leading category, outings and entertainment, had 73% of people conducting research on-line, conveying the current major gulf between different product categories when it comes to online shopping and research.

The report noted that about 5 per cent of Australians ‘will purchase food and groceries online’, with only 2 per cent exclusively buying their groceries over the internet. This could be expected to grow steadily over coming years as many regions in Australia have had precious few options, if any, when it comes to online shopping. However, to get the most out of the online arena the supermarket chains need to turn around a perception that the quality of fresh food would be compromised.