Ten years ago, the choice for shoppers was pretty simple. The introduction of more competition has contributed to a big shift in the way people shop, multiple top ups have replaced the traditional weekly shop, and shoppers are less brand loyal, visiting multiple stores rather than being loyal to just one retailer.
Coles and Woolworths are under threat more so than ever before. Coles seems to be nudging ahead slightly, but as discount retailers gain traction, there is a strong need for differentiation apart from price. Down Down vs Cheap Cheap just isn’t going to cut it anymore.
The ‘supermarket war’ is only set to intensify, with Lidl, the global giant preparing to enter our market, buying retail sites and applying for trademarks on home brands.
Although only rumour still at this stage, all the signs are leading towards the fourth largest retailer in the world launching and causing the biggest shake up since Aldi in 2001.
With 11 per cent market share and growing, Aldi continues to push the price message, upping the anti with their advertising spend and a very single minded message: save 50 per cent of your grocery bills by shopping at Aldi. With 75 per cent of Australian’s worried about grocery prices, this is a pretty compelling story.
In the highly competitive grocery market in the UK, Waitrose, has seen profits fall and is looking at ways to enhance their service offering to fight off competition from Aldi and Lidl.
A recent initiative: ‘Pick Your Own Offer’ gives their loyal shoppers 20 per cent discount on their favourite 10 items – a way to secure loyalty but at a high cost to Waitrose.
It has also introduced initiatives such as free coffee and newspapers when shoppers spend over a certain amount, another way to differentiate against the fierce competition.
So where to from here in Australia? Coles and Woolworths need to differentiate their offering, which has become remarkably similar as they both compete on ‘fresh’, claim the best prices, and spend up big on celebrities like Jamie Oliver and Curtis Stone.
The only way forward will be to shift the focus from price to adding value to the retail experience, for example:
- More theatre in store to create engagement and enhance the shopping experience
- Improvements in ease of shop, aisle navigation, and shelf availability led by technological improvements
- Loyalty programs becoming more tailored and easier to redeem.
A bit of competition of course is healthy, and the winner is definitely the shopper who will save money and be spoilt for choice.
Coles and Woolworths have had a good run for a long time…but where does it leave suppliers, farmers, and IGA retailers who will find it harder and harder to compete on price?
Melanie Scarf is a senior account director and ‘shopper expert’ at 31ST:SECOND.