Category Archives: Supermarket Wars

Is there room for another grocery discounter?

With Aldi and Lidl opening stores across Australia and giving the traditional grocery stores a run for their money, is there really any room for a third grocery discounter?

Kaufland - discounter

German retail company, Schwarz Group, has plans to bring the hypermart chain Kaufland to Australia.

Kaufland has seen success in Eastern Europe with more than 1,230 stores and has a strategy similar to Lidl and Aldi but sells branded products as well as its’ own discount merchandise.

While hypermarkets are not something that Australians have really witnessed before, the Kaufland model is based around a large format store stocking up to 60,000 product lines – everything from groceries to electronics – and this could be the differentiating factor that attracts consumers to ‘give it a go’.

Already experts believe that the Aldi’s and Lidl’s of this world leech off the bigger supermarkets initially and then convert those shoppers to buying their bulk shop from them, using Coles or Woolworths for the specialist items that they cannot offer.

If Kaufland has all the discounts and a wide product range, including their own ‘K-Classic’ brand, this could be exactly what consumers are looking for.

The Coles and Woolworths of this world, however, do not agree that it’s all down to price and still remain strong about differentiating themselves by the other services they provide in-store.

It will be very interesting to see what impact this ambitious Australian investment and development program for Kaufland has on the Australian grocery market and how consumers will react.

 

Aldi Ranked third in Australia for brand awareness

Over the past year, Aldi has certainly been hitting the headlines in the Australian supermarket wars. In the latest study by UK-based research company YouGov, the results indicate that Aldi is one of the most talked about brands in Australia and is up there with top brands such as Google, YouTube and Apple.

Displays 2 go - Aldi Brand

The studies rankings are from Q4 2015 and included over 250 brands. They asked respondents: “If you’ve heard anything about the brand in the last two weeks, through advertising, news or word of mouth, was it positive or negative?”

Scores can range from 100 to -100 and are compiled by subtracting negative feedback from positive.

rankings

As expected the top 10 list is dominated by digital heavyweights, but Aldi came in third on the list: the highest non-digital brand featured, ahead of supermarket giant Coles who came in fifth. No surprise that the major rival Woolworths didn’t make the list following a year of forgettable ad campaigns and consumer disappointment.

So if anyone was thinking that Aldi was not here to stay, think again. Aldi has made a massive impact on consumers and looks like it is becoming a household name whether you shop there or not.

 

 

Coles or Woolies?

It’s official, the cheapest place to shop between Coles and Woolies is Coles, by as much as $400 a year – which is quite a bit in grocery terms.

Supermarket Wars - Displays2goThis week the Macquarie Bank has released its MICAWBER report, which basically compares the cost of two shopping baskets, one from Coles and the other Woolies. Coles came out on top for being the cheapest by approx 3.5% on a weighted basis.

It’s an eye-opening report that shows the importance of having a sound and focused strategy in business, and especially in grocery.

So what does this mean for Woolies?

Supermarket wars have certainly been a hot topic in 2015, and with Christmas fast approaching the battle has never been greater.  With the expansion and success of Aldi, both Coles and Woolies have had to come out guns blazing with key messages for their customers around quality, service and price.

But what we’re actually seeing is a smarter war being played out by some of the players. Coles have the upper hand strategically because their approach demonstrates a better understanding of their competitors and the market they’re in.

The report states that “Fresh is the primary driver of the price differential, which includes fruit, vegetables, meat and dairy related categories.” Coles have understood and focused in on what differentiates them from Aldi, with an understanding that many Australians still buy their ‘fresh’ food from them and more of their staples from Aldi. Rather than fight it, they have embraced their differences and focused on ‘Fresh’

Coles ‘Prices are down’ campaign focuses on fresh and has resonated much better with its audience than Woolies ‘Cheap Cheap’ campaign which misses the mark by focusing on everyday goods.

Whichever way we look at it Woolies just seems like they are fighting a losing battle. The question is how strong are they and what new tactics and strategies will their commanding officer bring in 2016? They need to be more strategic, more focused on specific differentiators and play to their strengths. ‘Everyday Low Prices’ should be a given, not something new and worthy of a big media spend.

Whatever the game plan, Woolies needs to reassess and come back fighting if they are to make any headway. We all know that sometimes you have to lose a few battles to win the war. Bring on the new year, I say.

The long road back for Woolworths

Displays 2 Go | Woolworths Opinion

Over the past few years Woolworths has been under the hammer to get their supermarket offering right, to reduce consumer prices and improve customer service. The new management team have big plans and the marketing messages all sing a good tune, but is it all too late for Woolworths?

Reviewing the Fundamentals

Woolworths has historically been the dominant grocery retailer in Australia, but over recent years that position has been eroded by a resurgent Coles and the ongoing rise of Aldi. Not only have they had to re-look at their price positioning in the marketplace, but they have had to reassess the general condition of their stores and trolleys, customer service, queue times and the availability of products.

Cost Reduction

The cost of a basket of goods has been a major influencer in the grocery market, and with the Woolworths $500 million investment in reducing grocery prices they are definitely using this as a key message to entice consumers back to their stores.

Deutsche retail analyst Michael Simotas said Woolworths had become “too expensive.” But with the recent reduction in prices, a family that does its weekly shop at Woolworths has reportedly gone from spending about $5 more than what it would have cost at Coles to paying about $1 less.

This reduction in spending is something Woolworths is pushing, with signs outside each store that say a trolley-load of groceries that cost $246 at the start of the year now only costs $200.

Store Improvements

The director of supermarkets Dave Chambers stated that he was “shocked” by what he saw in store when he first took on the role earlier this year. He is now investing A$65 million over the next 12 months upgrading its fleet of shopping trolleys, fixing rusty shelves and holes in floors, improving lighting and signage, and removing gates to make stores appear more welcoming.

Displays 2 Go - TrolleyCustomer Demands

They have also introduced a new loyalty scheme which gives you instant money off your groceries. The data collected from the loyalty program is helping them understand what and where customers are buying products.

There is talk that Chambers is considering replacing the current nine store formats with just four types of store – premium, mainstream, mainstream rural and budget – to better reflect demographic and geographic differences in shopping habits. Chambers stated that “We might see more value-oriented stores that have more space given to good products but in affluent communities more space given to best products.”

Displays 2 Go | Woolworths By changing the format of these stores it will enable them to address the problem of availability and product choice, giving the consumers the right products every time they shop.

Service Levels

Woolworths have recognised that service levels and shopper experience is something that needs to be addressed immediately, and the research they are conducting called “voice of the customer” is able to give results within a day. This allows store managers to take swift action to remedy problems, which we see as particularly positive.

Will it Work?

Frankly, they have no other choice if they are to recover. The position they find themselves in is entirely of their own making, and they need to fight their way out with an extended campaign of renewal.

Consumer perceptions take time to change, and as it has taken a sustained period of behaviour to create the problems they have, so will it take a sustained period of alternate behaviour to turn it around.

 

 

 

 

 

How to get Woolworths back on track

Having worked in the grocery retail industry for a number of years, I’ve seen plenty of change and plenty of things stay just the same. The recent hype over Woolworths’ ongoing troubles, culminating with Grant O’Brien announcing he will stand down, has led me to a few conclusions.

Here’s my take on some of the things Woolworths supermarkets need to be doing :

1. Get your pricing sorted

Research by Woolworths and others shows they clearly have a problem with price perception; a perception that is based on fact.  In other words, shoppers think Woolies is expensive, and they are right.  This will be a longer-term project for their management, but they must get started right now on fixing their pricing and the perception will begin to fix itself over time.  This issue will continue to hurt them as a legacy of previous management decisions, but can only begin to correct when the pricing issue is addressed.

2. Stop competing on house brands

Trying to compete with Aldi on their own-brand products is an exercise in futility.  By all means have home brand and generic brand offerings in all relevant categories, but not at the expense of major brands.  Learn the lessons from overseas experience in this area.

3. Accept there is a role for the discountersDisplays 2 Go - Aldi Image

Recognise and accept there is a role for the discount retailer within the Australian supermarket landscape, and act like it.  Just try to keep their share to 15% rather than 40%!  There is no point trying to crush them out of existence, so never behave as if that’s your objective.

4. Accept the profit pool has shrunk

The days of fatter margins and reduced competition are over.  Accept it, re-align your forecasts and objectives, and don’t look back.  That includes constantly looking to suppliers to prop up your profits.

It’s a brave CEO who faces their shareholders and tells them the gravy days are gone and they need to re-think their expectations – that’s not how public companies work.  With a new CEO coming in it represents a good opportunity to do just that.

5. Don’t forget number one

When the shopper walks into one of your stores to see that the number one brand in a category has been removed from prime position and replaced with your own brand, what is that shopper supposed to think?  To who’s benefit is that move?  Never, ever forget who is most important in your business.Displays 2 Go - Consumer choice

6. Kick Aldi where it hurts

Focusing on Coles and Woolworths’ comparative strengths (ergo Aldi’s comparative weaknesses) gives competitive advantage:

–  Work in partnership with your vendors to deliver more value to the consumer.  They are the ones spending their own money on product development, advertising, innovation and general investment in their brands, so support them!

–  Woolworths and Coles should be able to deliver a far superior shopper experience, particularly at the checkout, by being better resourced generally.  Make this experience as positive as possible.  It’s the Aldi shopper who needs to queue for longer, bag their own items and pay a credit card surcharge.

–  Research says that most Aldi shoppers are doing a top-up shop at the Woolworths or Coles anyway, so the opportunity to impress is available every day.

 

Phil Hine is the General manager at Displays 2 Go Australia’s leading manufacturer of in-store demonstration and sampling equipment. With an outstanding range of products, a clear understanding of the marketplace and custom built designs that provide the perfect solutions to meet your needs, why not give us a call?

Call us now 1300 240 250

Will discounters like Aldi rule in Oz?

Displays 2 Go - Aldi Australian MapOver the past few years discounters like Aldi have had a major impact on the Australian grocery retail sector. The latest survey by UBS/AFGC estimated that Woolworths and Coles collectively lost more than $500m in sales to Aldi in the last financial year.  This precipitous decline in sales and profit is unlikely to abate without substantial change to the strategies these business employ.

So what can retailers do and what is their strategy?

Experts from the UK spoke at the recent Australian Food and Grocery Council’s annual executive conference, and explained that a price war can be avoided by taking lessons from successful retailers such as Britain’s Waitrose and Marks and Spencer. Both retailers are considered to be upmarket brands, and have defended their turf against the discount retailers by adopting tactics such as focusing on increasing their range of chilled semi-prepared meals, along with celebrity appearances, product demos and boosting in-store service levels.Displays 2 Go - M&S Ready Meals

Looking at the strategies for both Woolworths and Coles, it appears they have taken some of these tactics on board. Woolworths has already identified semi-prepared meals as a growth opportunity and we can expect to see them in stores from June this year.

Coles have taken a slightly different approach, and one that analysts UBS* believe is a more sustainable plan. They have shifted to a partial every day low pricing (EDLP) model which aims to improve price perception and reduce the reliance on promotions, which in turn should reduce cross-shopping.

Displays 2 Go - private labels

It is also believed that both retailers will reduce their range in the next 3 years, with Coles being the most aggressive; there is talk of cuts of up to 30% being planned in some categories. Woolworths have also hinted that they may look to launch a private label in the future, but have been warned against this by Mr Edward Garner from Kantar Worldpanel, stating that similar strategies had been abandoned in Britain.

One thing is for sure: Aldi is here to stay.  They have permanently changed the market, impacting both retailer and customer behaviour. Profits for the big two are under pressure, and the potential to squeeze suppliers further seems to have been exhausted. We believe the lessons learnt overseas can be applied in the Australian marketplace, and retailers need to continue to listen to experts and experiment with a number of strategies. It remains to be seen who will come out on top.

Displays 2 Go is Australia’s leading manufacturer of in-store demonstration and sampling equipment. We understand DISPLAY, and we’re enthusiastic about creating impactful and effective materials that promote your products at launch events and in the marketplace.

With an outstanding range of products, a clear understanding of the marketplace and custom built designs that provide the perfect solutions to meet your needs, isn’t it time you gave us a callCall us now 1300 240 250

* UBS/AFGC – Australian Supermarkets Global Research 28th May 15