Special Feature
Part of a ZDNet Special Feature: Coronavirus: Business and technology in a pandemic

Constrained online sales capacity sees WooliesX growth drop below recent levels

Temporary changes made during the quarter to its online delivery service are to blame.

Woolworths has said despite double-digit growth in online sales during the third quarter, its capacity in Australia was constrained in March due to temporary changes that were made to its online delivery services, resulting in growth becoming more subdued.

For the third quarter, total group sales increased 10.7% to AU$16.5 billion, of which AU$11 billion was made of its Australian food business. 

The digital arm of the business, WooliesX recorded online sales growth of 26.5% year on year to AU$461 million for the third quarter, compared to the online sales growth recorded during the same period last year which increased 34.7% year on year to AU$368 million.

"WooliesX delivered solid sales in the quarter; however, growth was below recent levels, due to material capacity constraints in March," the company told shareholders on Thursday.

latest developments

Coronavirus: Business and technology in a pandemic

From cancelled conferences to disrupted supply chains, not a corner of the global economy is immune to the spread of COVID-19.

Read More

"Online sales in January and February increased by over 40% but declined in March with sales increasing by 26.5% in Q3. While online penetration of 4.1% increased on Q3'19, it was below Q2'20 penetration of 4.4%."

The company blamed the temporary suspension of its online deliveries and pick up services to all customers in March for the slow down. During that period, Woolworths prioritised serving the elderly, people with disability, and those who have had to self-isolate during the COVID-19 pandemic.

However, Woolworths resumed its online delivery services to all customers last week.

Since then, the grocery giant has partnered with couriers Sherpa and Drive Yellow to sign on 5,000 contracted delivery drivers to help get online orders to customers.

Earlier this week, it also teamed up with Uber to get more online deliveries out. The service has started at three Townsville-based Woolworths stores, with the supermarket giant expecting to expand the service to be more cities in "the coming weeks".

"Our e-commerce business has steadily been re-establishing all online services with capacity doubling in mid-April to ensure sufficient availability for all customers," Woolworths said.

Digital traffic more than doubled in March to 38 million visits, with active app usage increasing to 1.2 million users.

"Customers increasingly started their shopping journeys online and used the website and app as a source of information for their food and everyday needs. The 'researched online, bought in store' (ROBIS) metric was at record highs," Woolworths said.

Woolworths Rewards members increased to 12.2 million by the end of the quarter, an increase of approximately 700,000 members compared to the prior year.

When it came to online sales for its New Zealand food business, it managed to record just over a 36% year-on-year increase to NZ$151 million for the quarter, despite the company experiencing some capacity constraints towards the end of quarter.

The group's biggest uptick in online sales, however, was experienced by its Endeavour Drinks business that saw online sales grow 43% -- a four-fold increase when compared to growth at the same period last year -- to AU$155 million.

Woolworths said it was underpinned mainly by increases from BWS and Dan Murphy's.

"BWS and Dan Murphy's both delivered strong online growth with BWS's sales growing by over 200% for a week during the period of peak sales, albeit from a lower base," the company said.

Other initiatives that contributed to the increase, according to Woolworths, included the launch of contactless pick up at Dan Murphy's.

Woolworths' results were similar to rival Coles, which reported on Wednesday that temporary online delivery changes saw online sales growth slowed to 14% during the third quarter.

RELATED COVERAGE