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Woolies views Amazon as a real threat

AAP logoAAP 25/11/2016 Petrina Berry

Woolworths is preparing for the "Amazon threat" by setting up a special team to deal with the online retail giant's potential arrival in Australia.

AmazonFresh, the online supermarket subsidiary of the American e-commerce company, is reportedly planning to launch in Australia as early as next year.

Woolworths says it sees Amazon as a serious disrupter, and chairman Gordon Cairns revealed the group has set up a team to look at the "threat".

"We didn't want to distract people in the supermarket business worrying about how to compete with Coles and Aldi today (with) worrying about Amazon so we have set up a separate unit," Mr Cairns told the group's annual general meeting on Thursday.

He said US retail expert Kathryn Tesija, a director on the Woolworths board, has been providing coaching and insights.

The former US Target executive also told shareholders that Amazon was a real threat.

"They are a formidable competitor. They will be someone we will take seriously," Ms Tesija said.

Woolworths has the advantage of being an entrenched player in the supermarket business, she added.

"Woolies has a number of different stores and the best locations in major cities in the country; and they built that over 91 years which Amazon can't replicate anytime soon."

Coles and German discount retailer Aldi have declined to say whether they have also set up teams to analyse the potential threat Amazon would pose.

A spokesman for Coles said the group was focused on continuing to deliver competitive food prices, while an Aldi spokesperson said it welcomed competition and was committed to being the price leader.

Roy Morgan Research chief executive Michele Levine doubts the arrival of Amazon would spark another price war.

"Amazon would target people who are early adopters of technology and can afford to pay the service that solves their problems," she said.

"If Amazon can bring a really good grocery delivery service that gives people what they want, when they want it and they get fresh produce, they can probably charge more for it.

"That's where the wining disruptor will be rather than cutting margins further."

While the supermarket giants are moving towards online shopping, their technology is still "a bit clunky", Ms Levine said.

"Amazon is definitely an extraordinary company. It's hungry and it is looking at Australia as a small but affluent market with rich pickings to be had."

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