The rise of Amazon Grocery and the increased opportunity of new entrants
- AGD
- Jan 1
- 2 min read
Amazon Australia is emerging as a key competitor in the grocery market. As of November 2024, Amazon holds approximately 1% of the total supermarket sales in Australia, generating around $1.3 billion in grocery sales [1]. This share, while still relatively small, is significant given Amazon's rapid growth and potential to disrupt the market further providing opportunities for challenger brands and new entrants at sell on the platform in other regions already.
Amazon's growth is focused on the following strategies
Fulfilment and Logistics: Amazon has significantly boosted its delivery capabilities in Australia, increasing its delivery capacity by almost 50% in 2023 alone [2]. It has established seven fulfilment centres and multiple logistics centres across the country, with plans to open five new operational sites by 2026 [3].
Investment: Since 2011, Amazon has invested $11 billion in Australia, with $5 billion in the past year alone [4]. It plans to invest an additional $1.6 billion by 2026 to further enhance its infrastructure and capabilities [1].
Product Range: Amazon has expanded its grocery offerings to include pantry staples such as rice, pasta, toilet paper, and soft drinks. While it currently does not compete in fresh produce, meat, poultry, and chilled dairy, it is expected to expand into these areas in the future [2].
Same-Day Delivery: Amazon aims to offer same-day delivery in major Australian cities by 2026, leveraging its advanced logistics network [1]. This capability is a significant competitive advantage, especially for time-sensitive grocery items.
Market Impact: Amazon's entry into the grocery market has already taken an estimated $1 billion in grocery sales from traditional retailers since 2017[1]. Its competitive pricing and efficient delivery services are reshaping consumer expectations and forcing traditional supermarkets to innovate and improve their offerings [2].
These efforts highlight Amazon's commitment to becoming a major player in the Australian grocery sector, posing a significant challenge to traditional retailers like Woolworths and Coles.
Coles chief executive Leah Weckert highlighted Amazon’s impact, telling a recent ACCC inquiry into supermarket prices that Amazon has already made significant inroads.
“Amazon has taken an estimated $1 billion in grocery sales from traditional retailers since it entered the market in 2017,” she said.
“In the areas they are competing with us, in those ambient categories [non-fresh produce items], given the growth we are seeing … this is something we are paying a lot of attention and are worried about. “The volume they are now selling is a real point of competition for us."
“The challenge we are going to have is being able to adequately compete with a two-hour delivery time out of robotics centres in Melbourne and Sydney.”
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