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?
I’ve read some pretty poor articles here, but this one certainly plumbs new levels. Including click bait links that pay a token amount to the referrer, if I’m reading this URL correctly.
https //www amazon com au/Gary-Majdell-Sport-Bikini-Swimsuit/dp/B08152HDR1/ref=pd_day0_d_sccl_2_4/358-9596565-0725004?pd_rd_w=eNVEj&content-id=amzn1.sym.23d36b26-dae4-4700-be5b-c84d8f5d2927&pf_rd_p=23d36b26-dae4-4700-be5b-c84d8f5d2927&pf_rd_r=MPCWCY4TAR99CWYHVWWY&pd_rd_wg=R3rLA&pd_rd_r=736ea5d4-f9a5-4267-a2e6-ec60adaf382c&pd_rd_i=B082KD1R7J&psc=1
Now, let’s talk about Amazon, shall we? While they have expanded the range of product available, acquiescence by the previous government to the self serving call from Gerry Harvey that GST should be charged on low value purchases is what led to the specific Australian portal. In many cases product on Amazon AU is vastly more expensive than product on Amazon US or UK. Even allowing for shipping and GST.
Is Jan suggesting we are going to all order our milk and icecream and frozen peas on Amazon? Preposterous. People like to see what fruit and veg they are selecting. Old ladies in particular like to grope the avocados. A good reason why the ones at Coles and Woolies in short arm reach radius are often bruised.
Or is Jan just having another whinge that she doesn’t like the current government. That she is keen to jump on the bandwagon complaining about the effects of inflation (a global issue resulting from two unnecessary wars in oil producing areas, begun by ‘strongman’ leaders, one of which we support and one which we oppose, despite being essentially identical in the war crimes generated), and the legacy effects on supply chains of the pandemic (remember the pandemic – it’s not over you know).
There is a cost to obsession with price over everything else. It’s a race to the bottom. You demand cheaper groceries, but then you bleat the dairy farmers can’t survive because of the cheaper milk you demanded be provided. You demand cheaper bread but then complain that the in-house bread from the supermarkets is driving the outside bakeries to the wall. You demand cheaper meat, but bemoan the loss of the suburban butcher, and complain the beef producers aren’t getting paid enough. You complain the price of items goes up, or the packaging shrinks in size, but its the manufacturer that sets the RRP and determines their packaging sizes.
And all the while you suck up this mantra that competition leads to better outcomes. But does it. In the long term? Oh we must have a third airline. Must we? It seems there is always a bailout at public expense or someone loses a lot of money. Rather than accepting this continual chant for more competition, and the demand for sale prices, perhaps the better way is to settle on sustainable pricing for products and industries. Pricing that ensures industries can survive rather than emaciate away by having to offer special and discounts that undercut their financial baseline. All because people are addicted to ‘cheap’.