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Woolworths' online business is going gangbusters, even as Aldi eats away at its market share.
It's the one area where the big two – Woolworths and Coles – have an advantage over fast-rising challenger Aldi, which does not offer online shopping.
Both Woolworths and Coles are growing their online business at about 30 per cent a year, which is a pretty massive snowball rolling down the hill.
Woolworths now has 600 trucks driving around to deliver groceries around Australia.
But providing all this convenience is expensive for the retailers. Even if the shopper doesn't leave their couch, someone has to pick out the groceries, price them and deliver them home.
And both supermarket chains know from the early days of online shopping that massively high delivery fees are a flop with Australians, regardless of convenience.
So what's Woolworths' answer? "Customer fulfilment centres" – or dark stores, in industry jargon.
Yahoo Finance understands dark stores are created the same way as a standard supermarket, with separate aisles for long-life products, fresh groceries and freezer items.
However, the public is forbidden from ever entering.
In effect, they are ghostly Woolworths supermarkets that don't have any customers in them. They exist purely to fulfil online orders.
Not having to worry about a physical customer presence means staff can stock and pick items a lot more efficiently, saving Woolworths money – which ultimately benefits the shopper.
Woolworths currently has three dark stores – West Footscray in Melbourne, Mascot in inner Sydney and Brookvale in northern Sydney.
Many online orders are still fulfilled at real supermarkets, especially for pick up orders. But the dark stores play an important role in getting groceries to people's doors while minimising the cost.
It all seems to be working, with Woolworths announcing a profit of $1.7 billion last week.
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