Why negligible Amazon grocery shopping savings aren’t worth the extra fees

Amazon Australia's offering is undercutting some supermarket staples.

Amazon Australia's offering is undercutting some supermarket staples. Photo: Simon Rankin

Amazon Australia’s grocery price points may appear competitive on the surface, but the ever so slight savings coupled with pricey delivery costs or ongoing membership fees mean consumers are likely to end up worse off.

The global e-commerce giant on Wednesday launched thousands of grocery products on its Australian website including pantry staples and snack foods such as Weet-Bix and Tim Tams.

Amazon’s first food range in Australia incorporates many of the brands available at Coles and Woolworths and, in many cases, its prices undercut that of the big supermarkets.

But are these savings worth the extra costs of membership or delivery fees?

The New Daily created a shopping list of 14 items including groceries and household consumables, and tested Amazon’s pricing against Coles and Woolworths.

Shopping at Amazon could save consumers up to $8 on washing powder, just over $2 on toothpaste and about $1 on antibacterial handwash.

Supermarket specials on certain items, such as Milo cereal and Nescafe instant coffee, also meant that these small savings balanced out.

While it was overall cheaper shopping at Amazon than at the big supermarkets – $82.21 compared to $82.39 and $83.77 respectively – the savings were negligible.

Amazon appears to be focusing on bulk purchases within some aspects of its range, so more significant savings may be pocketed by those consumers with large families and storage space.

But non-members need to spend more than $49 before they can receive delivery free of charge.

Otherwise, to secure free delivery, consumers are forced to fork out $7 every month to hold a Prime membership.

Costs aside, Amazon is yet to have the same extensive range as supermarkets, with the launch products largely limited to snack foods and an organics range.

The key missing component was its lack of fresh produce.

Retail expert Dr Gary Mortimer said incumbent retailers Coles, Woolworths, Aldi and Costco “won’t be overly worried”.

There’s really not a great deal of savings.

“Amazon would have algorithms scraping supermarket grocery prices nationally, making sure popular products are always slightly lower than retail price.”

So far, Amazon has just two fulfilment (warehouse) centres to service the whole of Australia – one at Dandenong, in Melbourne, and another at Moorebank, in Sydney.

One-day delivery is available in select areas only.

“No one wants to wait two days for groceries,” Dr Mortimer said.

“A big battle Amazon Australia will face is time and distance. Like the problems they’ve faced in Canada, Australia has a small population and very large land mass and greater distance between capital cities.

“Online delivery of fresh food is a challenge … even for Coles and Woolworths and they each have hundreds of stores.”

In Australia, the portion of retail purchases online is still relatively small.

Specialty food and liquor online sales make up just 5.7 per cent of all online purchases in Australia, according to an Australia Post report.

E-commerce analyst Scott Kilmartin said Amazon’s future success will rely on its ability to perform well where the supermarkets have fallen short.

“Niche speciality brands and consumer choice, which is shrinking on supermarket shelves, will be the medium to long-term winner as Amazon’s market share grows,” he told The New Daily.

“Initially Amazon’s limited offering will be no threat to Coles, Woolies or Aldi, now or in the next year – but it will grow and grow.”

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