As the ACCC labels Australia’s supermarket landscape as an “oligopoly”, Amazon is emerging as a significant competitor.
Now the second-largest online retailer in the country, according to Goldman Sachs, Amazon is working to enhance its logistics network, aiming for same-day delivery in major Australian cities by 2026.
Since 2011, Amazon has invested A$11 billion in Australia, including A$5 billion in the past year, and plans an additional A$1.6 billion investment by 2026.
Projected gross merchandise volume for Amazon in Australia is expected to grow from A$4.5 billion to A$6.5 billion this year, with the company targeting increased penetration of the grocery market.
Online grocery shopping accounts for just 7% of sales in Australia — well below the US and UK — pointing to Amazon’s significant opportunity for market expansion.
Amazon making inroads
Coles chief executive Leah Weckert highlighted Amazon’s impact, telling the ACCC inquiry into supermarket prices that Amazon has already made significant inroads.
“Amazon has taken an estimated $1 billion in grocery sales from traditional retailers since it entered the market in 2017,” she said.
“In the areas they are competing with us, in those ambient categories [non-fresh produce items], given the growth we are seeing … this is something we are paying a lot of attention and are worried about.
“The volume they are now selling is a real point of competition for us.
“The challenge we are going to have is being able to adequately compete with a two-hour delivery time out of robotics centres in Melbourne and Sydney.”
While Coles and Woolworths have maintained record revenues and profits, even as consumer spending power declines amid rising inflation and interest rate pressures, Weckert noted Amazon’s ongoing threat.
“Our expectation is they will continue to grow and invest,” she said. “They are likely to also expand their range over time.”
Grocery sales, including snacks and beauty products, are a key concern for Coles and Woolworths, with Amazon forecasted to generate $1.3 billion in grocery sales, though this is still only 1% of total supermarket sales.