Grocery giant Woolworths has moved a significant step closer to finally making its online sales as profitable as regular shopping, revealing its WooliesX digital arm chalked up a whacking 43 percent surge in sales for the quarter in Australian food over a year ago.
The stellar performance came on the back of a raft of enhancements to Woolies’ online ordering, collection and delivery model that has included ‘drive-thru’ and ‘drive-up’ options becoming available to 123 stores, part of a push the retailer has dubbed “ultra convenience.”
Total online sales leapt to $480 million for the quarter (14 weeks), up from $335 million from the previous corresponding period.
While Woolies has made a big song and dance about scan-and-go options in four of its stores, the real haymaker for digital is the combination of faster vehicle access coupled with stabilised and differential delivery prices that can be bought on an annual or monthly subscription.
The subscription delivery option which is not available to business, starts at $15 a month for midweek (Tuesday to Thursday) deliveries over a $100 basket spend climbing to $19 per month for the 7 day option. There is also an annual option.
Dubbed Delivery Unlimited, the pricing model comes on top of more immediate and more expensive options.
During the last investor briefing Woolies CEO Brad Banducci described same day delivery as the real sweet spot for making online profit accretive, with collection and pricing now being adjusted to milk that market.
There’s also been a telling incremental shift in the mix of ‘voice of the customer’ (VOC) and ‘net promoter scores’ NPS that suggests online sales will be more permanently blended into customer satisfaction measures.
“VOC NPS (Store and Online) has also been re-weighted with Online VOC increasing to 30 percent from 25 percent,” Woolies’ results said.
“Mobile app engagement also increased as the experience, stability and speed of the app continues to improve.”
While the premium for shopping online was not revealed in the quarterly sales figures, the strong growth suggests Woolworths has found where there are significant points of price elasticity and resistance, some of which are already known.
A small bump in price for heavier items – think 4 litre washing liquids, dog food, canned goods etc – is clearly more attractive to time poor customers that just want the big stuff chucked in the back of their cars on the way back from picking up the kids from footy training.
It can also be a small price to pay for the avoidance of paediatric pester power, especially when the stores are baited with cheap plastic trinkets for the Lion King or the ultimate mind seeding exercise, Discovery Garden.
WooliesX talked-up the lure of those promotions online and their success, but there will be some customers prepared to pay to avoid evade tantrums at the checkout, or indeed demands for junk food.