Australia’s F&B market is changing, but how and why?

June 6, 2018 / By  

F&B is often highlighted as a bright spot of the retail sector. But Australia’s F&B market has not been immune to the modernisation in the way consumers and sellers are interacting. Many F&B operators have made tactical adjustments to their business models and service offering to capitalise on Australia’s growing online consumer demand.

Three major structural changes in consumer spending behaviour have been the catalyst for retailers opting for an omni-channel selling strategy:

  1. Generational change : ‘Today’s consumers’ are notably different to ‘yesterday’s consumers’ with the internet and social media more integrated in day-to-day life. The former demand immediacy with their purchases, favouring more efficient and convenient transactions.
  2. Price transparency : Digitisation has allowed consumers to compare retailer prices instantly online, improving market transparency and efficiency.
  3. International competition : Globalisation of retail will result in an increased presence of international retailers in Australia (Aldi, Kaufland and Amazon). This has encouraged domestic retailers to drive initiatives to match their online and offline service offerings.

Australian food operators are actively adapting and exploiting online growth opportunities. Both major Australian supermarkets – Coles and Woolworths – have invested heavily in their ‘click-and-collect’ facilities and established multiple ‘dark stores’ across the country to better service online consumer demand. A ‘dark store’ is a supermarket fulfilment centre, established to solely service online demand (i.e. no customers) and typically have a traditional supermarket layout.

Many F&B outlets are forming strategic partnerships with specialised logistics or delivery companies to incorporate the service.  Coles partnered with delivery operator, Airtasker, in early 2018, to offer a personalised home delivery online system. Food retailers continue to leverage the sharing economy to achieve on-demand retailing. Menulog, a home delivery food operator, reported a rise in restaurant partnerships of 2,600 to 10,200 operators in 2017 nationally, double the number in 2014, according to media reports.

Ecommerce and the sharing economy have come together to meet the growing demands of consumers. Australian retailers have taken the lead from US operators. Walmart and Nordstorm have leveraged delivery services from operators such as Uber, Lyft and Deliv to improve thier delivery speed and try to provide products on-demand. Coles and Woolworths have also trialled a similar drive-through concept initiated by Amazon in the US, allowing customers to pick up their pre-packaged groceries from dedicated lockers in select locations.

Retailers are not alone in their response to new consumer trends. Australia’s biggest retail landlord, Scentre Group, introduced new ‘Uber’ pickup and drop off locations at three of its Westfield Shopping Centres in early 2018, with an intention to roll out the concept across a further 20 centres by year end. This will allow customers to use both Uber as a transport provider, and accommodate faster delivery times for UberEats orders from retailers operating in the centre.

Like many established retail markets across the world, a maturing online marketplace will provide F&B retailers with new omni-channel selling opportunities but also create risks for those retailers reluctant to make change. Those who capitalise on new technologies and develop a growing online capability will be better positioned to outperform as the retail market evolves. Shopping centre owners will need to be at the forefront of these evolving consumer and F&B industry trends to maximise asset management opportunities and drive investor returns.

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