This month alone, four new online supermarkets launched in Australia. Here’s the lowdown on the new arrivals:
Part of a global tech company that operates in the US, India, the UK and New Zealand, Geezy Go launched in Sydney this month offering grocery delivery in under 20 minutes. This platform also promises prices similar to or lower than its rivals.
Milk Run just launched last week, offering fresh produce sourced directly from Australian farmers. It’s only in Surry Hills and Darlinghurst in inner-city Sydney currently, but it will be expanding to more suburbs each week. Delivery promise? 10 minutes.
Pretty Green, a sustainability-focused grocery delivery service, offers a range of fresh produce from local markets, as well as popular household staples for free and contactless delivery, with no minimum spend. It delivers with a chosen two-hour time slot but is striving for six-minute delivery in the future.
Rolling out across metro Sydney and Melbourne this month, Send offers most of the items found in a conventional supermarket but is also planning to work closely with local vendors and provodores to access fresh produce. It’s promising delivery within 15 minutes and is aiming to establish 30 locations by the turn of the year.
Voly launched in Sydney last week, offering fresh produce and groceries for delivery in 15 minutes. Voly was co-founded by Thibault Henry, who brings supply chain and logistics experience from Balto and Nippy, and Mark Heath, who previously held roles with Uber and Cloud Kitchens. Voly aims to “build the future of retail and redefine speed” by “teleporting the grocery store” to customers.
Dr Jason Pallant, a consumer behaviour expert at Swinburne University of Technology, agreed that the amount of grocery start-ups is “definitely significant”.
“The pandemic, lockdowns, and initial panic buying led to rapid growth of online grocery sales through a combination of home delivery, click-and-collect, and even meal kits,” Pallant told Inside Retail.
“What’s really important is that it forced some consumers to try these options potentially for the first time, which could create a much wider potential user base for new competitors.”
While Coles and Woolworths were slowly investing in online operations prior to the pandemic, they were not prepared to deal with the surge in demand that occurred during lockdowns last year, according to retail expert and QUT professor of marketing Gary Mortimer.
“For many years, online food and grocery shopping in Australia really only represented less than 1 per cent of total physical retail sales,” Mortimer said.
“In 2020, the big supermarkets were caught off guard when we went to lockdown and demand increased substantially for online food and groceries. It showed how exposed the big supermarkets were to an underdeveloped e-commerce platform.
Since then, both Coles and Woolwoths have significantly expanded their capabilities, with Coles announcing last week that it pulled in $2 billion in online food and grocery sales in FY21.
Mortimer said it’s “an opportune time” for online grocery retailers to enter the market.
But the difficulty these start-ups face is that grocery consumers, in particular, often have a routine of where and how they shop.
“As a start-up with no existing customers, the challenge is convincing customers of existing brands to change their habits,” Pallant said.
Mortimer agrees that when it comes to food and groceries, Australian shoppers tend to be creatures of habit.
“We tend to buy our favourite brands every week, which means that if you’re a small start-up and you don’t have access to those brands, you’re less inclined to get the customer,” he said.
And strategic alliances with brands don’t happen overnight.
The common denominator in all these new start-ups is speedy delivery. From 20 minutes to six, they are all attempting to outdo each other on delivery time.
And if consumers are not satisfied with the performance of the big players, Mortimer suspects many could be eager to try alternative online grocery platforms in order to access food and groceries faster.
A viable threat?
Pallant believes Coles and Woolworths should be concerned about losing their online sales to new start-ups.
“As big existing brands, it can be harder for them to move quickly, and they need to answer to shareholders. Whereas start-ups can take more risks, move quicker, and don’t necessarily have to be immediately profitable; they can offer consumers additional benefits or enhanced service that may be unsustainable for the larger players,” he said.
Pallant said the flurry of activity in the start-up space could force the existing players to adapt their model to avoid losing customers, or acquire the start-ups they see as threats.
But Mortimer is not convinced that these start-up models are sustainable or scalable in the long-term.
“Many of those pureplay grocery retailers seem to be operating in Sydney, which has a long-term lockdown currently but also a very large population in a small area of landmass. To grow sustainably, that business needs to be replicated in Melbourne, Adelaide, Perth, Brisbane, where you’re dealing with larger geographic space and smaller populations,” he said.
“I think that as the big retailers begin to open up their e-stores and online fulfillment centres, we will see higher service levels from the big supermarkets, and that will convince shoppers to stick with the large retailers.”
Mortimer suggests that these start-ups might benefit from aligning with the likes of Metcash, to leverage the IGA model, or Aldi, which has held back from launching an online grocery offering due to operational costs.