How Australia has become a hotspot for online grocery

Australia’s has become one of the world’s most dynamic online grocery markets. The country has long been recognised for its concentrated supermarket networks, led by Woolworths and Coles. The rivalry has created a platform for strategic investments in fulfilment, digital innovation and customer experience.

In the latest quarterly results (Q1 FY26), Coles’ online sales increased by 27.9%, with penetration increasing to 13.3% while Woolworths Group online sales grew 13.2% with penetration reaching 16.2%. Coles is gradually narrowing the gap with Woolworths as it begins to unlock the full efficiency of its partnership with Ocado, following its sites in Sydney and Melbourne only becoming full functional in Q4 2024.

Highly competitive duopoly driving innovation

Both Woolworths and Coles see online as critical to long-term growth. That strategic focus has created a cycle in which one retailer introduces a new service like shopping lists and online weekly deals, only for the other to match or surpass it shortly after. This dynamic has produced consistent, market-wide improvements. Woolworths has invested heavily in automated facilities and direct-to-boot services, while Coles’ partnership with Ocado has modernised its end-to-end e-commerce operations. Their combined scale and competitive ambition mean online grocery in Australia is pushed forward at a relentless pace.

Geography shapes a distinct fulfilment network

Australia’s geography plays a major role in how online grocery works. Long distances, suburban living and high car ownership make the fulfilment model different from those in Europe or parts of Asia. Large format supermarkets are widespread, giving retailers spacious hubs from which to pick and dispatch online orders. These stores can process weekly baskets and support rapid click-and-collect, which remains uniquely popular in Australia, making up approximately 40% of online sales at the top two retailers. This is especially true for Woolworths, where click-and-collect (also known as Direct-to-boot) sales grew 19.4% in the latest quarter, supported by two new Direct-to-boot sites, as well as expansion of Direct-to-Boot Now (sub-60min service).

A fulfilment network that continues to expand

Both major retailers continue to add capacity at scale. New fulfilment sites and automated centres have increased delivery slots. Coles is still at the stage of ramping up capacity. Its Central Fulfilment Centre (CFC) catchment areas in Melbourne and Sydney have been expanded and Same Day CFC fulfilled delivery has just been launched for customers in Melbourne catchments. Woolworths has recently opened a new Adelaide CFC which will double delivery capacity across Greater Adelaide. Shoppers also have the option to use Direct-to-Boot services, with 12 bays available at the Adelaide CFC. Woolworths Group now operate seven Customer Fulfilment Centres across the country.

Loyalty, data and retail media strengthening the digital journey

Loyalty sits at the heart of Australia’s digital shopping ecosystem. Woolworths’ Everyday Rewards and Coles’ Flybuys are deeply integrated into the online experience, powering personalised offers, targeted price promotions and more tailored trip planning. For retailers, loyalty data helps improve forecasting and availability. For shoppers, it drives consistency and reward. Retail media has grown quickly on the back of these loyalty programmes, offering suppliers the ability to influence online shoppers at the point of research and decision.

Shopper expectations are rising due to speed, choice and certainty

Australian shoppers are increasingly expecting better speed, flexibility and value. The convenience of placing an order on a phone and picking it up in the car boot, or having it delivered in minutes, has reset expectations.

In a challenging cost-of-living environment, online grocery offers transparency, basket visibility and budget control.

The new frontier is immediacy and mission-specific fulfilment. Woolworths’ quick commerce service, Milkrun, is its fastest growing online proposition (Q1 FY2026). It is now available at 628 stores with 113 new stores added during the quarter. Online delivery orders fulfilled within two hours increased on the prior year to 43%. Coles has shared earlier that its rapid delivery is generally available within two hours, with the service accounting for 40% of its sales.

What’s next for the channel?

The next chapter of online grocery in Australia will lean into more fulfilment options and greater digital personalisation. The quick commerce services provided by Woolworth’s Milkrun and Coles’s Rapid Delivery will grow in importance. Automation will lift productivity and help reduce cost-to-serve. More recipe-to-basket tools, loyalty-driven personalisation and retail-media activation will be seen across channels. Over the next five years, online grocery in Australia will be shaped by the same forces pushing Tesco forward: capacity expansion, same-day delivery growth, richer digital ecosystems, and an accelerating shift in shopper expectations.

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