Following the recent success of online grocery retail, Australia is now competing with other leading E-commerce nations such as the United Kingdom for their place in the online market.
In the last 12 months, Australian shoppers have spent $16.4 billion in the online retail market and 11 per cent of all grocery buyers are now shopping online.
Last year the
Woolworths Online shopping channel reached over $1 billion in total sales and delivered more than 3 million items to customers per week, posting an 8.5 per cent rise in overall profits.
This increase in online shopping and domination of the grocery market prompted the introduction of the first dark store in Sydney and the next step for an already booming online market.
The 7,000 square metre Mascot store built exclusively for online shopping currently employs 80 workers who pick and pack online orders from a customer free warehouse.
The main objective of the dark store is to reduce the impact on pre-existing chain stores and create a more efficient online delivery service for customers.
A spokesperson for Woolworths told IT News that the new dark store was necessary in meeting the needs of customers.
“The flexibility offered in terms of opening and operating hours, not constrained around store opening hours and otherwise busy times in physical supermarkets, will benefit customers,” the spokesperson said.
Until recently the Australian online retail market has been dominated by other categories, with the most popular purchases being travel, accommodation and clothing and cosmetic brands.
According to Ray Morgan Research, the average Australian internet shopper now spends $285 online per month with food and beverages ranking 5th at a $2billion share of the market.
The United Kingdom is still leading the charge, with IGD, the grocery market research body predicting the British market to double in value over the next five years, to a net worth of £11 billion.
Tesco, one of the largest grocery retailers in Britain opened its sixth dark store last year and recently increased its share of the industry by 2.4 per cent. The grocer already offers same day delivery and processes an estimated 4,000 orders per day which is 50 per cent more than the average store.
Rival supermarket Sainsbury’s recently cleared £1 billion annual profits and announced its first dark store in London to improve the quality of online shopping.
The superstore recently installed in Sydney was modelled after the successful online shopping supermarkets that were designed in the UK.
British grocery chains implemented the new dark stores to replace the models that still exist in Australia, where online orders are picked from public stores during opening hours.
Trials within some of the biggest grocery chains such as Sainsbury’s, Tesco and Waitrose found that the previous model results in negative impacts on in-store customers and frequent product substitution.
Vice President of Consumer Products and retail for Capgemini in Britain, Chris Webster, said dark stores were the solution to a strong adoption of online food shopping by the public.
“We expect the efficiency of dark stores to increase and they should become just about profitable [as the scale of them improves],” he said.
The head of research for UK Company Jones Lang Lasalle, Jon Neale, told The Guardian that the increase in demand for new sites was not only driven by online sales, but the concentration of shoppers in certain areas.
"The growth of internet shopping is about the changing nature of demand. It is more pronounced among certain demographics and is not distributed evenly across the country," he said.
Surprisingly, the rapid success of online shopping that has prompted the creation of dark stores, is not yet present in the U.S.
According to Fitch Ratings, online grocery sales currently make up only 1 per cent of the American grocery market.
Some researchers have surmised that the U.S. are just late comers, with Kantar Retail predicting a 20 per cent share of the market for online grocery buyers in 2020.
Reasons for the unprecedented low may include the high cost of distributing groceries to customers and a more widespread population affecting the cost efficiency of such an operation.
What this means for Australia
Public surveys that have been conducted within Australia and overseas also conclude that the subjectivity of fresh food, such as fruit and vegetables is still too high for consumers to trust supermarket warehouses.
Despite this, the online grocery retail market in Australia is predicted to grow at a similar rate to Britain, with Woolworths revealing plans to open additional dark stores in cities such as Brisbane and Melbourne to meet the demand of online grocery buyers.
With internet and smart phone usage and the prominence of online shopping growing monthly, Australia is now contending for a top spot in the future of online grocery retail.