With 75 per cent of the Australian population now fully vaccinated against Covid-19, Coles and Woolworths executives will be hoping the issues that challenged their teams during the first quarter of FY22, such as supply chain disruption and mandatory isolation, can be left in the past. Since the Delta outbreak first hit Australia in May, Woolworths Group has had over 1500 exposure sites, forcing over 22,000 team members into temporary isolation. At Coles, over 20,000 employees have had to isolat
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With 75 per cent of the Australian population now fully vaccinated against Covid-19, Coles and Woolworths executives will be hoping the issues that challenged their teams during the first quarter of FY22, such as supply chain disruption and mandatory isolation, can be left in the past.Since the Delta outbreak first hit Australia in May, Woolworths Group has had over 1500 exposure sites, forcing over 22,000 team members into temporary isolation. At Coles, over 20,000 employees have had to isolate. “The good news is the conditions are now improving as vaccination rates increase,” Coles chief executive Steven Cain said on Thursday’s sales call. “I am delighted to report that around 90,000 of our team members have now had at least their first jab and that all of our working team members in New South Wales and Victoria will be double vaccinated or have a medical exemption before Christmas, which will ensure a safe trading environment and minimise the number of team members in isolation.”Both Coles and Woolworths introduced Covid-19 vaccination mandates this week in a bid to better protect staff and customers at their stores. And although high vaccination rates are likely to result in less disruption for the retail businesses, there’s still a rocky road ahead. Online competition heats upReporting first-quarter results this week, Woolworths Supermarkets announced in-store sales of $10.6 billion, a drop of 0.6 per cent on the prior corresponding quarter, while Coles reported supermarket sales growth of 1.8 per cent to $8.6 billion.Both retailers made strong gains in e-commerce as many customers opted to shop from the safety of their home during lockdowns, choosing contactless pick-up at the store or home delivery. Retail expert and QUT professor of marketing Gary Mortimer noted that Woolworths is leading the way in the online grocery stakes. “Woolworths is clearly outpacing its rival, reporting 53 per cent growth on last year, to $1.4 billion, while Coles reported $764 million, up 48 per cent on the corresponding quarter last year,” Mortimer said. “Online penetration (the proportion of sales coming from online) continues to grow. Woolworths’ online sales now [represent] 11.4 per cent of physical store sales; at Coles, that’s 8.7 per cent. Both those penetration numbers are well up on the same time last year.”Over the same period last year, Woolworths’ online penetration was at 8 per cent, while online was contributing 6 per cent of Coles’ overall supermarkets sales.How lockdowns impacted customer behaviourClearly, frequent and extended lockdowns across the country prompted a shift in customer behaviour, driving uptake of online grocery shopping, particularly in states like NSW and Victoria, but Mortimer doesn’t expect that consumers will abandon e-commerce after lockdowns end.“I suspect, as we move into 2022/23, we will see those growth numbers stabilise, much like what we are seeing in physical store sales. I don’t believe we will see actual decline,” Mortimer said. “Once you have set up your online account, linked your credit card, and constructed your grocery shopping list, online food and grocery shopping becomes a relatively habitual activity.”Competition will remain fierce in e-commerce in the coming years as both retailers ramp up their capabilities; Woolworths through a partnership with Takeoff Technologies and Coles through its Ocado partnership. Life beyond lockdownLooking beyond supermarkets, both retail groups were challenged in other areas of their businesses during the first quarter. At Woolworths Group, sales at department store chain Big W fell 17.5 per cent due to store closures and trading restrictions.“Big W sales dropped by almost a third, down $324 million. Pleasingly, about $120 million of those lost physical sales migrated online. Big W reported e-commerce sales increased 124 per cent. Overall a net sales loss of about $200 million,” Mortimer said. Lockdowns also had a negative impact on Coles’ fuel and convenience business, Coles Express. “With less movement, fuel volumes fell and correspondingly, store sales dropped 10 per cent,” Mortimer said. With NSW and Victoria returning to life after lockdown, it’s good news for consumers, but the outlook will continue to be challenging for the food and grocery sector.“Both retailers will continue to cycle big gains in 2020/21 driven by panic buying and stockpiling, as consumers return to eating out at reopened restaurants, bistros and bars,” Mortimer said.
