Coles And Woolies To Renew Push To Win Online Shoppers

Sydney Morning Herald

Tuesday June 10, 2008

Ari Sharp

COLES and Woolworths are to pursue online grocery shopping with renewed vigour, but retail experts doubt they will be able to overcome the barriers that have held back the service for a decade.

Despite the apparent convenience of filling the pantry and fridge in just a few clicks, it seems consumers still want to choose their fresh fruit and vegetables and other items.

For Australia's two biggest retailers, which together hold 75 per cent of the grocery sector, their online operations are at best an appendage to their stores, with services available only in Sydney, Melbourne and, in Woolworths' case, Canberra.

But there are signs they are preparing for another foray, perhaps buoyed by British figures from Verdict Research showing that within five years groceries will overtake electrical goods as the top sector in online retailing.

Coles has ramped up promotion of its online offering before an expected relaunch. Late last year it nearly doubled its online range to more than 17,000 product lines.

Woolworths offers delivery through its Homeshop website, and last month the chief information officer, Dan Beecham, was talking up the opportunities the internet presented. But both retailers are cagey about their online plans and refused to discuss them in any detail.

Local experts warn that the retailers face a battle to win over shoppers, pointing to consumer habits, pricing and logistics as holding back an increase in online grocery buying.

"People are undisciplined when they go food shopping," said Steve Ogden-Barnes, program director at the Australian Centre for Retail Studies. He said habits had swung from one weekly shopping trip towards several smaller trips using the supermarket more as a convenience store.

"It's not necessarily a fault on the retailer's part but a lost skill on the consumer's part, which is planning a weekly meal menu," he said. "We know, for example, that a lot of people don't know what they're eating that evening until four o'clock in the afternoon. Getting people now to sit down and think a week in advance is probably at odds with the mindset of consumers, which tends to be much more short term than that."

Consumers seem reluctant to trust someone else to select fruit, vegetables and cuts of meat. Also lurking at the back of the mind is the fear that the products chosen may not be the best quality. Goods in tins and sealed packets are far safer.

"If you looked at grocery shopping, what's holding it back probably isn't the commodity side of things - it's probably the food and produce side of things," Mr Ogden-Barnes said.

A big cost saving for many online retailers is keeping stock in a handful of distribution centres, but that is trickier with perishables. Deloitte's multichannel retail principal, Kasey Lobaugh, said: "Those that have been most successful [internationally] have focused on 'pick from store' distribution models, instead of centralised dedicated fulfilment centres."

The amounts Coles and Woolworths charge for delivery vary according to date, time and location. The Woolies charge is capped at $17.50 and Coles says its charge averages $12.50.

Phil Bonanno, director of retail strategy with the consultancy The Leading Edge, said his company's research found customers were willing to accept a maximum "convenience premium" of 10 per cent including delivery.

© 2008 Sydney Morning Herald

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