Customer Leakage Between Woolies, Coles & Aldi, With Online Grocery Taking Bigger Slice Of Pie

A woman uses a grocery delivery app on her smartphone. She is selecting fresh produce while using the app.

Australians spent $94.6 billion in supermarkets in the year to March 2020. It’s clearly an enormous market, mostly dominated by Woolworths and Coles.

Data from Roy Morgan’s latest Fresh Food & Grocery Report shows that, between them, the Woolworths Group and the Coles Group took 67.5 per cent of the total supermarket spend.

While Woolworths has the larger share of overall spend, Coles isn’t too far behind. However when it comes to online grocery shopping, which has shaped up as the next major battleground, the difference is marked.

Although shopping online is simple and easy for most, many Australians have long preferred to do their grocery shopping in person.

In March 2020, when the COVID-19 pandemic first took hold, only three per cent of the nation’s total supermarket spend was taking place online. However Woolworths had the lion’s share of this, with 57.4 per cent of all online supermarket spending coming through its virtual tills, compared to Coles’ 26.1 per cent.

The arrival of the pandemic not only saw physical supermarket shelves stripped bare, it turbocharged the move to online grocery-buying to such a degree demand could not be met and services were temporarily restricted.

With lockdown no longer in place except in specific Melbourne locations, shoppers have increasingly returned to physical locations throughout Australia, but it is likely that many of those who recently made the move to online groceries will continue to use that option, at least some of the time.

Roy Morgan CEO Michele Levine said the competition to retain online grocery shoppers post-pandemic opens up an interesting new front in Australia’s fiercely fought supermarket rivalry.

She said: “Our data shows that almost one quarter of grocery-buyers who shopped at Coles, Woolworths or Aldi in a four-week period actually spent money at all three supermarkets.

“That is a high rate of customer leakage between the brands. It might even be said that rival brands attracting customers away from what they regard as their main supermarket have succeeded in larceny.

She adds, however, that online shopping changes the dynamic significantly.

“It does this first by narrowing shoppers’ options. Aldi and IGA account for 22.2 per cent or more than one-fifth of the overall grocery spend (leaving just over 10 per cent for other supermarkets such as Foodland, Foodworks, local independents and convenience stores).

“But Aldi doesn’t offer online shopping at all, and IGA has it only on a discretionary store-by-store basis.

“Second, the inconvenience involved suggests it is less likely that grocery-buyers who are making an order online with one major brand will ‘virtually pop in’ to the competition and go through the online ordering process there too in the same way they might have done if shopping in person.

“So there is no doubt about the significance of the burgeoning online grocery market. Roy Morgan will continue to monitor it closely — watch this space to find out how the various players rise to the challenge.”

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