Supermarket giant Woolworths is rightly seen as a bellwether for the wider Australian retail sector, so it was no surprise that yesterday’s profit warning rang alarm bells with many investors and commentators yesterday.
While Woolies sales grew in the December quarter, poor consumer sentiment and the floods have seen the company cut its net profit growth forecast from 8-11% to 5-8%.
We’ll have to watch figures from the rest of the retail sector closely in the next few weeks. Will everyone else be hit as hard as Woolies? Or is the giant losing ground to a resurgent Coles?
That’s for another day though. What I want to focus on today is a little line at the very end of Woolies announcement yesterday under the heading “Online Sales”.
“Woolworths has continued to develop and implement its strategy in relation to its online business across all retail trading divisions. Good progress has been made with online sales increasing 75% for the half.”
Hang on – a 75% rise in online sales?
While a proportion of this growth was likely to have come from the opening of Big W’s online store in May 2010, the headline number certainly looks pretty good.
We asked Woolworths for a breakdown of the online sales figures in dollar terms and across different divisions this morning, but at this stage the company isn’t breaking out web sales from store sales.
That may suggest the proportion of sales generated online is pretty small, but it is rising at an impressive rate.
Now, Woolies’ online business does get some natural protection from overseas competition due to the fact that you can’t import groceries from offshore.
But it’s Dick Smith and Big W brands fight in some of the more competitive segments of the retail market – electronics, clothing and general merchandise.
The Dick Smith website is a particular example of what big retailers with large store networks can do online. As well as being loaded with customer reviews and product information, the site allows users who want to by in-store to check stock levels before they leave the computer.
It’s an idea that Retail Coalition members like Harvey Norman and Myer should look at.
Until we know more about the numbers behind Woolies online sales, it’s hard to judge how successful they have been.
But small online retailers should take note – the big guys are finally starting to twig.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
