Online deals ahoy: Woolworths aims to imitate Amazon with a twist on its marketplace model

Woolworths is looking to ramp up its e-commerce offer with a new marketplace.

Woolworths is looking to ramp up its e-commerce offer with a new marketplace. Photo: TND

Woolworths is taking a page out of Amazon’s playbook and will launch a new marketplace this year in a bid to double its online product range.

As the e-commerce gold rush heats up, Australia’s largest supermarket will be selling everything from work boots to washing liquid through a new online channel that will let its suppliers take the reins for the first time.

That’s good news for consumers, because there should be plenty of bargains floating around as approved suppliers flood Woolies with cheap deals.

“As well as offering more choice to the millions of customers who visit our website each week, our marketplace will provide existing and new suppliers with fresh opportunities,” Woolworths director of new business Faye Ilhan said of the new service in a statement on Friday

In launching the marketplace, Woolworths is emulating the likes of Amazon and eBay, which have shot to the forefront of the e-commerce boom over the last decade by drawing in billions of dollars in sales from customers hungry for bargains and more choice in products.

There’s a twist though: Woolworths wants more control over the suppliers that sign up to its marketplace than Amazon, and will focus on everyday essentials rather than other categories, like TVs.

“This will be a highly curated marketplace focused on range extension in our core everyday needs categories,” Ms Ilhan said.

But the new platform will help the supermarket capture some of the fast-growing online grocery market from Amazon, which has grown local sales to over $1 billion since launching in Australia back in 2017.

Woolworths’ move means cheaper prices

Retail consultant Brian Walker said Woolworths’ move reflects the online future of everyday merchandise retailers, as brands like Target continue to close dozens of physical stores across the country.

“This is a pure volume play, there’s only one way that goes – cheaper prices,” Mr Walker, head of Retail Doctor Group, told The New Daily.

“This is about scale, and that’s where brands like Woolworths have a big advantage.”

Woolworths will start small, offering an expanded range of its everyday needs products from BIG W on its marketplace initially before allowing its tens of thousands of other suppliers access to the new platform.

It is hoped the marketplace could help Woolworths double its online product range by relying increasingly on third-party sellers.

That’s because, unlike other e-commerce sites, marketplaces allow suppliers themselves to list, market and (sometimes) distribute their own products – allowing retailers to play more of a hosting role.

This helps drive down prices for consumers as suppliers compete with each other for prominence on a platform, while brands like Amazon (and soon Woolies) make money by charging commissions on sales.

“Marketplaces represent the next step in terms of making products accessible in all categories online,” Mr Walker said.

“We already spend four hours a day (on average) on smartphones researching products and so forth … its about product discovery.”

It’s not the first time a traditional Australian retailer has tried to take on retailers like Amazon at their own game. Back in 2017 department-store chain Myer tried to launch its own marketplace service in partnership with the very same startup now helping Woolworths, Marketplacer.

A range of others, including IGA-owner Metcash and hardware chain Bunnings have also already launched marketplaces.

Woolworths’ rival, Wesfarmers – owner of Target, Kmart and the largest stakeholder in Coles – has also dipped its toe into marketplaces through the acquisition of Catch Group in 2019.

Myer’s experiment with Marketplacer fell flat though, with few consumers switching to the platform, which was eventually dumped.

But while Myer was merely a Marketplacer customer, Woolworths has decided to invest in the company through its venture capital arm, which should give it more sway in making sure it gets the service it wants.

Topics: Woolworths
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