Proving that pandemic-era surges in online shopping were more than a fad, exploding revenues have convinced Woolworths to invest $100m in an automated customer fulfilment centre (CFC) dedicated to fulfilling online orders for Western Sydney customers.
The 22,000 square metre Auburn CFC – which will lean heavily on robotic automation and employ 250 staff members to dispatch 50,000 home deliveries per week – “will deliver a step change in our online offer”, Amanda Bardwell, managing director of Woolworths online-grocery arm WooliesX, said as the new facility was announced.
That change, Knapp vice president food solutions Rudolf Hansl added, will come as the retailer pivots towards Knapp’s “highly automated and economical concept for online grocery”.
The site, which is pending state government approval and expected to be built by 2024, will scale up concept ‘e-stores’ that are already live in Carrum Downs, Victoria; Penrose, Auckland; and Moorehouse, Christchurch; with another site being built in Maroochydore, Queensland.
Stock and process automation in the Carrum Downs store, for one, are said to help its 150 staff fulfil online orders five times faster than at a conventional store.
Automated fulfilment is bolstering an online grocery business that, Woolworths has reported, grew by 92 per cent during the last six months of 2020 to be worth $1.8b.
“We’ve seen an extraordinary acceleration in online grocery shopping over the past year,” Bardwell said. “We expect more and more customers will turn to the ease and convenience of home delivery to reclaim time in their busy lives, [and] to keep pace with demand, we need to innovate with new technology to boost capacity.”
To put those numbers in perspective, a decade ago Woolworths was trumpeting the success of its online transition based on a 63 per cent year-on-year increase in online sales – from a much smaller baseline.
All told, online sales now account for around 8 per cent of Woolworths’ total revenues – up from 3 per cent at the beginning of the pandemic.
Online grocery sales have outpaced e-commerce sales as a whole across the Woolworths group, which grew 77.9 per cent during the second half of last year to be worth $2.94b.
That helped Woolworths extend its lead over rival Coles as the pandemic evolved, with Roy Morgan noting in a July analysis that Woolworths’ share of all online supermarket spending grew from 57.4 per cent in 2020, to 60.1 per cent in the first quarter of 2020.
COVID habit becomes long-term trend
Propelled by panic buying and widespread lockdowns during 2020, explosive adoption of online grocery shopping has grown the online grocery market from around $3.6b in 2019, to $5.7b last year and a projected $6b this year, according to IBISWorld.
Woolworths will spend up to $150m to build CFCs in Sydney and Melbourne that will support up to $750m in annual online revenues each.
Dedicated online fulfilment centres mark a significant step forward compared to early online shopping services, which employed in-store personal shoppers to pick and pack products from individual stores’ shelves.
Personal shoppers are still part of the strategy: late last year, Woolworths announced it would spend $50m to retrain more than 60,000 workers in a broad range of digital skills that would, Woolworths Group CEO Brad Banducci said at the time, “[make] core retail processes much faster and more efficient than ever before”.
The Auburn facility is the latest in a string of major automation investments by Woolworths, which previously announced plans to partner with warehouse automation giant Dematic, consolidating three existing facilities into a 40,700 square metre National Distribution Centre (NDC) in Moorebank, Sydney.
That site will leverage warehouse management algorithms to automatically pick from more than 9,000 products – sourced from over 900 suppliers – and load them onto restocking pallets that are customised for individual aisles of each of the company’s more than 1,000 grocery stores.