Amazon is the biggest Internet retailer in the world in terms of revenue and market capitalization and it has separate retail websites for different countries. In December 2017, Amazon launched its retail website amazon.com.au.in in Australia. From 17 September 2018, Amazon Australia has started selling pantry food on its website. By adding food and beverages to its Australian e-commerce site, Amazon has created a pressure on companies like Woolworths and Wesfarmers Ltd.’s Coles to invest more in their online grocery business.
With the launch of pantry food and drinks, Amazon is able to bring greater convenience to customers, underpinned by everyday brilliant value and fast delivery. It shows that Amazon is focused on growing selection and services for Australian customers. Currently, Amazon is not having a chilled supply chain which is a reason why Amazon is not able to sell fresh foods in the short- to medium-term.
Moreover, there are more than 400 Australian and International brands which are included on Amazon New pantry food range such as Arnott's and Oreo biscuits, Uncle Tobys breakfast cereals, Milo milk powder, Masterfoods seasonings, T2 tea, and several other products of grocery brands which includes Coca-Cola Amatil, Fairy, and Swisse, etc.
Many foods and grocery suppliers are currently unwilling to sell their products on Amazon as they are concern about their relationship with Coles and Woolworths and they fear that these companies may delist their brands or demand for cheaper prices. However, many brands like Kimberly Clark, Reckitt Benckiser, Unilever have started selling their products on Amazon which encourages other suppliers too. It is expected that Amazon's logistics will help the companies to decrease delivery costs and it will make their products more affordable to customers.
Amazon has also started one-day delivery service in selected areas in Australia, which has created additional pressure for Coles and Woolworths to start testing express two-hour deliveries in selected supermarkets and liquor stores.
At present, Coles and Woolworths are dominating the online food retailing in Australia and they have an upper hand at this point as they both are enjoying better economies of scales. Recently, Coles released its quarterly results in which Coles disclosed that its total sales have been increased by 5 percent in Q1 of FY 2019 to $9,838 million. Coles is soon going to be demerged from Wesfarmers and it will become a separate company listed on ASX. In FY 2018, Woolworths witnessed strong sales and EBIT growth driven by Australian Food with Group sales from continuing operations up 3.4%, and EBIT up 9.5% despite ongoing reinvestment. Woolworths also experience 30 percent Online growth after making investments in AU and NZ Food. Currently, Woolworths is focusing on partnering with our suppliers to deliver quality and improved availability. Woolworths’s shares are currently traded at $27.820 with a market capitalization of circa $36.22 billion as on 17 October 2018 (AEST 1:25 PM).
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