A few years ago, as internet shopping combined with the strong dollar began to take a sledgehammer to the earnings and business models of clothing shops and department stores, the grocers were expected to be spared.
After all, the conventional wisdom was that customers would want to inspect the fresh food before they bought it.
Flash forward a couple years, and the major grocers, not to mention the industry upstarts, are racing to win customers online and now through their mobile phones, as web-based shopping for groceries catches hold with busy consumers.
For Woolworths and Coles it's a matter of learning from the walloping the slow-to-innovate department stores got from web-based competition. For nimble online-only players, it's a matter of exploiting the more measured pace of change at the established grocery retail industry.
In any case, online grocery shopping is growing. Web traffic in the online grocery category has jumped 70 per cent over last year, according to analytics and analysis firm Experian. Underscoring how quickly the sector is evolving, web traffic to Grocery Run has routinely outpaced that of both Woolies and Coles over the past year. It happened most recently in the week to October 6, when there were 234,000 visits to Grocery Run, compared to 147,000 to Woolworths and 124,000 to Coles, according to Experian, with a large share of those hits estimated to be from wireless devices.
“Experian anticipates that the increased popularity of mobile devices will be a major catalyst for furthering growth in this category," said Dave Audley, head of research and consulting at Experian. "It is generally consumers who are most pushed for time that are likely to use online grocery shopping sites and consumers are becoming more comfortable shopping from mobile devices."
Woolworths said it has had 1.95 million downloads of its smartphone shopping apps. Wesfarmers-owned Coles said it plans to expand its 'Click & Collect' service, which allows customers to pick up their online orders at stores, this year. Catch of the Day-backed Grocery Run launched a mobile app this week as well. Taking a page from Catch of the Day's flair for driving traffic to the site, the Grocery Run app includes a 'scratch and win' coupon that can be redeemed at the next purchase, suggesting the role technology, rather than competitive pricing alone, will drive sales strategy in the sector.
But Grocery Run is not alone. Online retail discount site eSOLD.com.au bought online grocery retailer OffYourTrolley.com last month. eSOLD now offers non-perishable goods using a hybrid model in which retailers pay the site for coupon listings. The company is upgrading warehouses this week to a 1500-metre space in Melbourne, a location four-times larger.
None of the online grocers provide hard numbers on sales volumes, but eSOLD director Adam Rowson said the "groceries" offered are mainly non-perishable consumer goods. The most popular item on the site is replacement razor blades, he said. "We get them from wholesalers in Melbourne and some items we gray import ourselves – it just depends on where we can get the best items for the best price."
eSOLD and Grocery Run's strategy of concentrating on selling non-perishables, cleaning products and toiletries, allows them to eat into parts of the major grocer's business, without offering fresh food. Selling discounted brand-name stock that can vary on a daily basis shifts competition towards to a discount, rather than selection-driven strategy, industry sources say. eSOLD's Mr Rowson said particular brands can be featured on the site from a matter of hours to months. For the new entrants, all indications suggest strong demand from customers.
After GroceryRun.com launched in September 2011, as a spin off of Catch of the Day, it generated $1 million a month, selling goods only two days a week. The company now says it generates $1 million a week.
And while online shopping in Australia is still small compared to traditional walk-the-aisle shopping, the trend is clear elsewhere. UK-based Tesco operates so-called "dark stores" designed to support its traditional retail chain which has been inundated by online orders.
The company aims to lift internet sales more than £5 billion ($7.8 billion) over the next five years, the Guardian reported last month. Tesco operates four such stores in London with another two slated to open, and further locations being scouted, according to the paper.
Which leads to the question: when will it happen on a large scale in Australia?
Experian's Mr Audley said the challenge for Australia's grocery sector isn't technology but geography. Time-poor customers have already shown a readiness and willingness to shop online for food. "The major challenge is more likely to be logistics and distribution, particularly in rural areas," he said.
In that realm, Australia's big retailers, like Tesco in the UK, may already have an advantage, according to multichannel retail expert Andy Powell of Agile Commerce Consulting.
"Coles and Woolies have the network and if they wanted to open dark stores, it's certainly an option for them," he said.
While Mr Powell sees only a "limited threat" from the online-only grocers because of the fewer items they offer, if the pace of change in the past few years is any guide, the rise of mobile shopping means much of the future of online grocery retailing may yet be up for grabs.
Do you buy your groceries online?