Amazon entry overplayed says IBISWorld

Posted by Andrea Hogan on 24th July 2017

AmazonFresh’s entry into Australia has been “overplayed” says market research firm, IBISWorld.

According IBISWorld, traditional brick-and-mortar supermarkets and already-existent online grocery retailers will not be as severely affected by Amazon as operators in other retail industries.

“While AmazonFresh will offer competitive pricing and use the latest technology, the effect on the major supermarket players will likely be mild compared with disruptions in other retailing industries, particularly in the short to medium term,’ said Nathan Cloutman, IBISWorld Senior Industry Analyst.

The Australian supermarket industry in 2017-18

The Australian supermarkets and grocery industry is expected to generate revenue of AUD $108 billion in 2017-18 says IBISWorld. Online shopping represents an estimated 2.8 per cent of supermarket and grocery revenue, valued at AUD $3 billion.

While IBISWorld states that online grocery sales are growing, it is still only expected to account for 4.3 per cent of total supermarket and grocery sales 2022-23.

“Coles and Woolworths have the advantage of having many physical locations close to consumers,” Cloutman said.

“In addition, the major supermarkets already have the scale and logistical strength to expand their online capabilities through options such as click-and-collect.”

“Coles and Woolworths are increasingly expanding their online presence in anticipation of Amazon’s arrival. For example, Coles opened its first online-only dark store in inner-city Melbourne in June 2016 and IBISWorld expects more of these to be opened over the next five years,” he said.

Amazon may need to overcome some hurdles

IBISWorld said Amazon will need to overcome the established logistics and delivery networks of Coles and Woolworths, along with Aldi’s low prices to gain significant traction in the Australian grocery market.

“One year on from starting in the fiercely competitive British grocery sector, Amazon has yet to make its mark,’ Cloutman said.

“This is another positive sign for the major supermarkets in Australia.”

“However, Amazon could use their large purchasing power to acquire a grocery chain and establish an offline presence in Australia, similar to what they did with Whole Foods in the United States,’ concluded Cloutman.

No AmazonFresh for NZ anytime soon says IBISWorld

IBISWorld said due to New Zealand’s size, it was unlikely AmazonFresh would enter the country anytime soon.

The supermarkets, grocery, and convenience sector in New Zealand is expected to total NZD $18.7 billion for the 2017-18 New Zealand financial year, which is equivalent to approximately 17 per cent of the Australian industry.

Related articles