Why Amazon Prime-Harris Farm Markets tie-up will spook Coles and Woolworths

The moment Australia’s supermarket giants have been dreading for years has finally arrived.

Amazon, the global retail behemoth, will start to distribute and deliver fresh groceries in Australia thanks to a newly-inked partnership with Harris Farm Markets, a primarily NSW-focused supermarket chain that is privately held and family-owned.

It’s the first time Amazon has offered fresh food in Australia — something that makes up the core of its business in the US.

For now, the service will be limited to 80 suburbs in Sydney but with other independent supermarkets already joining up with delivery services in other States, the big two will be wary of how much more growth will come.

Amazon’s arrival into Australia has already heightened customer expectations for fast delivery, as Coles boss Leah Weckert told a Senate hearing into supermarket prices in 2024.

“(They) come in and set up the more traditional Amazon offering, which is your books and toys and electronics and the like,” she said.

“But then they will increasingly move into that grocery space, and they price very competitively because they do have a high willingness to come into a new geography and make low or negative returns for an extended period of time to build market share.”

The supermarkets are rightly wary of what Amazon will do next. At a sheer scale, they are dwarfed by Amazon’s resources. With a market cap of $US2.6 trillion ($3.7t), that’s 99 times larger than Woolworths’ $37.4b and 129 times the size of Coles’ $28.6b.

Amazon Prime APAC director Arno Lenior said the launch was led by customer demand for fresh groceries delivered fast.

“Now they can get Harris Farm’s quality fruit and veg at their door the same day they order,” he said.

“Everyday Essentials is one of our fastest growing categories in Australia, and we’re thrilled to add Harris Farm’s exceptional range of fresh produce and artisan products to our selection, enabling eligible customers to do their complete grocery shop on Amazon.”

The company has promised its orders will be delivered within two-hour windows — either same- or next-day, with orders processed at Harris Farm’s Leichhardt store in Sydney’s inner west.

Amazon already stocked about 60 to 70 per cent of items available in a traditional supermarket — think Vegemite, soft drink cans, pasta and toilet paper — with the latest expansion expected to be viewed as a test for further success.

Coles and Woolworths have moved into automation in order processing — Coles opening two AI-robot powered warehouses in Sydney and Melbourne — to further beef up efficiencies, fearing slow online delivery will affect sales. Woolworths late last year reported a 9 per cent jump in eCommerce grocery sales compared to a year prior, while Coles reported a 28 per cent lift.

Former Woolworths boss Brad Banducci emphasised the key metric was not the number of physical stores — which for Amazon will often be zero — but how quickly customers could be serviced.

Prospective customers of the Amazon-Harris Farm deal are set to receive free shipping on certain orders as a way to attract more of them to sign up to loyalty scheme Amazon Prime.

How quickly Sydney customers can get their groceries will be a clear telling point. With Coles and Woolworths due to report sales results within the next month — and analysts set to pile pressure on delivery and ecommerce plans — executives at the big two are sure to be among the first Amazon-Harris Farm customers.