** Citi analysts project that the introduction of click and collect (C&C) fees would partly recover costs for Australian supermarkets

** Brokerage says C&C fees would also help incentivise more in-store purchases, where profit margins are the highest

** We believe a charge of ~A$5 for regular C&C is a suitable starting point for Woolworths WOW.AX and Coles COL.AX, recovering ~25% of the estimated direct labour costs - Citi

** Brokerage says Coles remains its preferred pick in the Australian supermarkets sector, maintains "buy" rating on stock

** Aussie consumer staple index .AXSJ up 1.4% YTD, while Aussie consumer discretionary index .AXDJ down 7.8% YTD

(Reporting by Shivangi Lahiri in Bengaluru)

((shivangi.lahiri@thomsonreuters.com;))