Why Woolworths and Coles are betting big on online

Australia’s leading grocery retailers, Woolworths and Coles delivered steady growth in the first half of 2026. Sales rose modestly, profits improved and supermarkets once again carried the group results. Beneath the surface, the half-year results reveal that the real momentum, the next phase of competition, is increasingly depending on online success.

Supermarkets still fund the model but growth is limited

Woolworths’ Australian Food division (including online) grew 3.6% in H1 2026 y-o-y. Growth was softer early in the half but strengthened in the second quarter, driven by investment in value, fresh, convenience and strong Christmas execution, plus online sales accelerated. Note that Woolworths results are impacted by Industrial Action in the lead up to Christmas in 2024.

Coles Supermarkets (including online) delivered a similar 3.6% growth, driven by value positioning, promotional effectiveness and increased engagement in its Flybuys loyalty ecosystem (+6.2% active members). Private label performance (+5.7%) highlights continued margin management through private label.

Supermarkets remain highly cash generative, but growth is tracking close to inflation (3.6%). This limits their ability to fund sustained investment without productivity gains elsewhere.

The real momentum is online

Coles’ online sales increased by 27%, reaching AUD2.8 billion in H1 2026. Ecommerce now represents 13.1% of supermarket value, a meaningful step up for a segment that has historically lagged Woolworths. Much of that growth reflects heavy investment in automated fulfilment and delivery capacity. Coles’ customer fulfilment centres continue to be upgraded and improve the optimise the efficiency of its operations.

Woolworths, however, still runs the larger digital operation. Woolworths online sales grew 15.3%, exceeding AUD 5 billion in H1 2026. The retailers also delivered productivity gains through AI-drive ecommerce picking optimisation and algorithm to align store labour planning with customer demand.

Ongoing tech-led productivity improvements will help the retailer grow earnings over the long term. In addition, both retailers are accelerating retail business and commercialisation of their loyalty assets to develop higher margin, asset-light businesses.

Coles’ weak link is Liquor

Liquor sales revenue of $1.9 billion declined by 3.2% as the liquor market weakened and competition intensified. Large-format Liquorland Warehouse stores were reported as a particular pressure point.

On a more positive note, Coles has successfully completed the 'Simply Liquorland' banner conversions. Through the store conversion, Coles Liquor hopes to deliver a consistent experience and greater value for customers across its entire network, including a more spacious store layout, clearer in-store signage and a tailored range. It remains to be seen if Coles Liquor will be spun off as a separate structure, so Coles can focus more on the core supermarket business.

Woolworths New Zealand, a softer contributor

New Zealand Food’s total sales increased by 2.8% in H1, with a more subdued Q2 growth rate of 2.4% as market growth slowed over the half. Online sales in H1 increased by 13.9%, with penetration reaching 15.2%.

Overall, the business continues to operate in a difficult economic environment. Earnings improved strongly in local currency terms, reflecting operational improvements and cost discipline. However, revenue growth remains modest when inflation is running at 3.1%.  (Source: RBNZ, Dec 2025)

What to expect next?

The H1 results reinforce a shift that has been building for years. The traditional supermarket, along with price, promotions and range, is no longer the growth engine. The next stage of grocery competition will hinge on how well retailers maintain the online growth momentum while managing the costs to deliver value back to customers.  

What this means for suppliers

As Australian retailers build more unified commerce models, suppliers will face higher expectations around availability, digital execution and data collaboration. Success will depend on visibility across search, recommendations and retail media, while value positioning and private label competition continue to intensify. Brands that optimise for both the physical and digital shelf will be best placed to capture growth.

Final takeaways

Woolworths and Coles are entering a defining phase where success will be determined not by store footprint alone, but by how effectively they integrate physical and digital retail into a seamless, scalable model. Online is becoming the core battleground for growth, loyalty and differentiation. The retailers that can balance investment with profitability, while delivering consistent value and execution across every touchpoint, will be best positioned to lead Australia’s next era of grocery competition.

What’s next?

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