Supermarket giant Woolworths is ramping up its presence in grocery delivery and muscling in on smaller start-ups by expanding its new 60-minute delivery service Metro60 to north-west Melbourne.
The nation’s largest grocery retailer is scrambling to compete in the online delivery space with numerous start-ups popping up to deliver fast groceries in the inner city over the past year.
The rollout from five Melbourne Metro stores, which incorporates 40 suburbs from Richmond to Coburg to Carlton North, comes just six weeks after Sydney’s eastern suburbs trial.
Woolworths seeks to win more customers in the $125 billion supermarkets sector who got accustomed to home delivery amid the COVID-19 rolling lockdowns last year.
Melbourne’s offer mirrors that of Sydney’s 60-minute delivery promise for a $5 fee with a minimum $20 spend. In mid-June Woolworth’s rolled out into 10 Metro stores in 70 Sydney suburbs from Rose Bay to Bondi Beach.
Von Ingram, Woolworths chief transformation officer, told The Australian Financial Review Metro60 is still in proof of concept mode, so there are no plans now to roll it out to other states.
“We’re really focused on what does the customer experience look and feel like and are we getting that return rate of customers,” she said.
“We are happy with the growth that we’re seeing, It’s very early days, but we are seeing a good number of return customers. We’re looking forward to seeing how this goes before we roll out further.”
Metro60 has more than 4000 items to buy on the app including hot chicken, sushi, fruit and veg, proteins, artisanal bakery and household essentials.
As more consumers shop online, the cost of delivering online purchases to homes is becoming more of an issue. Many big retailers and start-ups are subsidising the cost of delivery to win customers. This makes online margins lower than traditional bricks and mortar margins.
Last-mile costs are likely to rise as more consumers opt for express delivery from start-ups such as Milkrun and Voly, and Woolworths’ new venture.
Asked if Woolworths will squash smaller competition or be outmanoeuvred by nimble start-ups given the demands of many Millennial shoppers, Ms Ingram said: “We’ve only been live for six weeks.
“I’d say we’ll take it further by quarter, essentially, and see how it scales. We would only want to scale in a smart and sustainable way. What we’ve heard from our customers is that they are looking for us to be consistently good at delivering in 60 minutes.”
The nation’s largest grocery retailer has partnered with Uber for this delivery service.
Milkrun founder Dany Milham told The Sydney Morning Herald and The Age he was not fazed by Metro60 because he was used to competing with Woolworths’ existing partnership with Uber.
The Young Rich Lister attacked the set-up, claiming Uber could not provide a reliable supply of drivers because it used casual contractors earning less than minimum wage.
Milkrun employs riders as staff on casual, part-time or full-time contracts, in line with retail award rates.
Fast-growing Milkrun was founded in 2021 in Surry Hills, where its first dark supermarket is located. Its initial promise was to deliver groceries to homes within 10 minutes. Prices are comparable to Coles and Woolworths.
It offers a targeted 2000 products in an area catchment – half that of Woolworths. It raised $75 million in a funding round in January.
But by late June it ditched the promise of 10-minute deliveries and hoped to secure more capital and stop mounting bottom-line losses.
In May, two venture capital-backed grocery delivery start-ups, Send and Quicko, collapsed because of high monthly cash burn rates.
Rival delivery grocery start-up Voly is also on shaky ground after cutting staff, and its promise of 15-minute deliveries. Voly raised $18 million last December led by Sequoia Capital India, with Global Founders Capital and Australian-based Artesian Capital also tipping in funds.
Extracted from AFR
