Everyone recognises that Australia’s supermarket duopoly is distorting the grocery market.
There’s been a lot of public hand-wringing about the issue, several government inquiries and a fair bit of finger-pointing, but not a lot in the way of concrete action.
The Coalition has proposed breaking up the duopoly, but it’s easy to say that in opposition. And establishing a supermarket chain from farm to checkout is expensive, time consuming and few would want to take on the entrenched Australian market.
A new code of conduct has been proposed, which is a laugh, because supermarkets already have one of those and it’s not done a lot to help rein in the retailers’ behaviour.
Crack in the wall
However, is a new player on the market the first crack in the wall for the duopoly? Some experts think so.
Well, not exactly new, Amazon has been around for a while now, but its foothold in Australia isn’t quite the same as its cult status in the US.
According to the Australian Financial Review (AFR), analysts at Goldman Sachs found Amazon was the second-largest online retail business in the country after Woolworths.
That’s a little-known fact to the public that would be shaking up the big retailers behind closed doors, especially Aldi which has no online retail sales. And much Amazon’s Australian success is due to increasing grocery sales.
Amazon’s Australian manager, Janet Menzies, told the AFR that while the vast majority of Amazon’s customers shop at Woolworths and Coles every week, groceries have become a significant growth opportunity for the business.
“We are focused on making sure we have that selection and that we can deliver it really quickly because a lot of those times those [are] items you want quickly,” she says. “They tend to be more ‘speed-sensitive’.”
New customers
By 2026, Amazon wants to have same-day delivery in every major city.
“There are still a lot of customers who are new,” Ms Menzies says. “A lot of people shopping with us today didn’t shop with us 12 months ago. Typically, people come to us, they’ll buy one thing, and then they’ll discover other categories. Over time, they start to believe that it’s actually a decent way to shop. It turns out that getting cat litter delivered by Amazon is pretty good.”
And there’s plenty of scope for sales figures to soar. Currently online retail only accounts for 16.8 per cent of total retail spending, and that figure is remaining relatively stagnant after the massive shift to online shopping during the pandemic.
So if Amazon could convince more of us to buy our groceries online, it may just shake up the retail market. Certainly, all the leading food retailers will be monitoring Amazon’s expansion with a forensic level of scrutiny.
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.
Poor reviews
It may want to improve its service levels though. A quick scroll through ProductReview found overwhelmingly scathing reviews for an overall rating of 1.6 out of five, mostly due to delivery issues.
Other flaws with the idea of shopping at Amazon include that as a US-based company, the vast majority of profit goes overseas and the company has been structured so it pays a measly tax burden to the Australian government.
Since 2011, Amazon has invested more than $15 billion in Australia across all of its operations. It has also announced plans to invest $490 million in opening two new fulfilment centres western Sydney’s Horsley Park by early 2026, creating 1000 jobs.
Amazon began in founder Jeff Bezoz’s garage as an online bookstore in the mid-1990s and has since morphed into the omnipresent online retailer it is today, selling everything from eco-friendly toothbrushes to men’s gold micro swimsuits. Also available in liquid silver, if that’s more your thing.
Amazon has a market cap or net worth of US$2.12 trillion.
Do you shop at Amazon for groceries or other products? Why not share your experience in the comments section below?
