Unless Woolworths and Coles maintain their dominance over online grocery sales, they risk losing volumes to smaller rivals and becoming less relevant to consumers, according to a visiting retail industry consultant.
A.T.Kearney’s global consumer and retail partner, Michael Brown, is speaking to suppliers at the Australian Food and Grocery Council’s annual Highlands conference on the Gold Coast this week.
He told the Australian Financial Review that the retail giants could lose market share to pure-play online retailers and packaged goods suppliers seeking growth by selling directly to consumers, as has occurred with other retail sectors such as electronics, books and homewares.
Online grocery sales represent 8 per cent in the US and 12 per cent in Britain, but in Australia they are currently only worth 1 to 2 per cent of the market. However, A.T.Kearney predicts online grocery sales will climb to 20 per cent.
The management consulting firm believes these sales will start disrupting the market when they reach 12 per cent. Brown pointed to the collapse of US duopolies in sectors like electronics, books, homewares and toys in recent years.
“Where there has been significant online penetration, we’ve lost one of the two players in the duopoly because the online players, whether Amazon or others, have taken that volume, making it impossible for two to be able to service the market in the way they did,” Brown told the Australian Financial Review.
“If we look forward to what could happen in grocery and fast-moving consumer goods, [the internet] is opening up the door for very specialised niche players to come into certain segments and start to siphon off volume which could, eventually, lead to again the inability of the duopoly to compete and be able to run their store networks the way they do today,” he said.
“They may not disrupt the whole store but enough niche players spread around could begin to disrupt the profit model.”
