Aus­tralia fo­cus

Su­per­mar­kets gear up for Am­zon’s ar­rival

The New Zealand Herald - - BUSINESS - Christo­pher Ni­esche com­ment

Aus­tralia’s big su­per­mar­kets are gear­ing up to meet the threat of Ama­zon, with Wool­worths plan­ning to of­fer what it calls ex­treme con­ve­nience.

With the US on­line re­tailer ex­pected to start oper­a­tions in Aus­tralia in the next two or three months, the dam­age it could do to re­tail­ers’ profit has be­come a very tan­gi­ble threat.

In re­sponse, Wool­worths has es­tab­lished pick-up points for on­line gro­cery or­ders at all of its 970 su­per­mar­kets around the coun­try and is test­ing one-hour de­liv­er­ies.

It be­lieves many cus­tomers will want to or­der their gro­ceries on­line then pick them up on the way home from work rather than hav­ing to wait around for a de­liv­ery driver.

The Wool­worths app on cus­tomers’ smart­phones will let the shop know when the cus­tomer is ap­proach­ing so their or­der can be ready to go. In about 100 lo­ca­tions shop­pers will be able to pick up their gro­ceries via drive-through.

It is one way the re­tailer is re­spond­ing to cus­tomer de­mands for “ex­treme con­ve­nience” and is aim­ing to pro­vide cus­tomers with a wider choice in how they get their gro­ceries.

“Ama­zon is ob­vi­ously a very ma­te­rial po­ten­tial com­peti­tor in this space,” chief ex­ec­u­tive Brad Ban­ducci said last month.

“Cus­tomers are look­ing for a lot more con­ve­nience in the way they shop.

“Ama­zon and many others are of course go­ing to pro­vide that con­ve­nience if we don’t.”

In fact, the pick-up ini­tia­tive was con­ceived by WooliesX, a new di­vi­sion cre­ated by Ban­ducci to ac­cel­er­ate its on­line growth and pre­pare for the ar­rival of Ama­zon.

Coles, the other big su­per­mar­ket chain, is tri­alling a home de­liv­ery service with Uber un­der the UberRUSH brand that will make rapid de­liv­er­ies of items miss­ing from on­line or­ders.

It has also teamed up with lo­cal bike de­liv­ery out­fit De­liv­eroo, of­fer­ing a lim­ited range of gro­ceries to in­ner-city ar­eas. There is some irony in the fact that the threat of tech­nol­ogy and on­line is bring­ing a re­turn of bi­cy­cle gro­cery de­liv­er­ies, a sight not seen on Aus­tralian streets for decades.

On­line cur­rently ac­counts for only about 3 per cent of Aus­tralia’s A$90 bil­lion ($99b) gro­cery mar­ket, but there is lit­tle doubt that will grow quickly.

Ama­zon is keep­ing quiet about its ex­act plans in Aus­tralia, but there is lit­tle doubt it is plan­ning an as­sault on the gro­cery sec­tor.

It has been in talks with many of Aus­tralia’s pack­aged food sup­pli­ers and non-food gro­cery sup­pli­ers.

Ama­zon’s power in the mar­ket can be seen from its US$13.7b ($19b) pur­chase of US gro­cery chain Whole Foods Mar­ket.

Not only does it demon­strate that the on­line gi­ant is pre­pared to spend big to make in­roads into gro­ceries, it also shows Ama­zon’s pulling power. In the week af­ter the pur­chase, it slashed prices and drove a 25 per cent in­crease in foot traf­fic to the store.

The Ama­zon brand is al­ready fa­mil­iar to and trusted by many Aus­tralians, so there is no rea­son to be­lieve lo­cal shop­pers would be any­thing but en­thu­si­as­tic about its gro­cery of­fer­ing.

Aus­tralia’s re­tail­ers will have been look­ing at these reports with trep­i­da­tion.

None of this comes cheap for the re­tail­ers.

The Wool­worths pick-up service is to be free for or­ders over A$30, which would be al­most all of them. That means the su­per­mar­ket will be pay­ing a worker to roam around the store and se­lect the items for each cus­tomer’s or­der, with the cost shav­ing a few dol­lars off the profit from each bas­ket of gro­ceries.

A re­cent UBS re­port es­ti­mates that Ama­zon will cut the earn­ings of Coles and Wool­worths by 8 per cent over the next few years.

Me­dia own­er­ship shuf­fle

We can ex­pect a spate of me­dia merg­ers and con­sol­i­da­tions now that the Se­nate has passed the Gov­ern­ment’s new me­dia laws. The leg­is­la­tion is yet to pass the Lower House, but with that be­ing no more than a for­mal­ity, the me­dia com­pa­nies will soon start jock­ey­ing for po­si­tion.

The new rules are a big win for Aus­tralia’s me­dia own­ers, in par­tic­u­lar Ru­pert Mur­doch.

They will scrap the “two out of three” rule which pre­vents com­pa­nies own­ing print, ra­dio and free-to-air tele­vi­sion in the same mar­ket.

Mur­doch’s be­he­moth News Ltd will be free to snap up smaller me­dia com­pa­nies and po­ten­tially move into ra­dio in ad­di­tion to pay TV and print.

Fair­fax, the pub­lisher of the Syd­ney Morn­ing Her­ald, Mel­bourne’s Age and a raft of re­gional pa­pers, is ex­pected to be at the fore­front of any move and is likely to merge with a TV station.

The ques­tion is whether it will be Nine En­ter­tain­ment Co or Seven. Nine is a pure TV player whereas Seven owns newspapers and mag­a­zines as well.

Me­dia com­pa­nies will be look­ing to merge to achieve cost sav­ings and to be able to take ad­van­tage of each other’s prod­ucts as they try to pro­tect their ad­ver­tis­ing rev­enue from Google and Face­book.

Pic­ture / Bloomberg

Ama­’s gi­ant dis­tri­bu­tion cen­tre near Mil­ton Keynes.

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