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Innovation, not price, will drive grocery giants’ growth, says IbisWorld

Innovation is expected to become the main factor to drive grocery stores’ growth instead of price, according to IbisWorld.

Grocery giants Woolworth and Coles are shifting their focus to innovation from this year, aiming to deliver new services, enhanced in-store customer experiences, and automated supply chains.

“Competition in the supermarkets industry remains fierce, and is likely to focus on capturing online market share in the year ahead,” said Tom Youl, senior industry analyst at IbisWorld.

“Woolworths has the lead at this point, but Coles is implementing new strategies to catch up.”

According to IbisWorld, online innovation will be the key point for grocery players to expand its market share. Online grocery ordering will become a widely adopted service over the next decade, rather than a niche offering for tech-savvy consumers.

“Using automation to assemble online orders is likely to be a key point of focus for supermarkets in 2021 and beyond, due to the major efficiency gains that can be achieved,” Youl said.

“A lower reliance on manual order assembly is likely to reduce wage costs for the Supermarkets and Grocery Stores industry, which are expected to account for 10 per cent of revenue in 2020-21.”

In terms of using automation to assemble online orders, Woolworth is one step ahead of Coles as the grocery chain operates four dark stores while Coles is still currently constructing its first two automated warehouses in Melbourne and Sydney.

“Consumer loyalty schemes will likely become more powerful, as firms use data collected through online-shopping behaviour to identify sales opportunities and drive consumer engagement,’ Youl added.

Besides e-commerce attempts, enhancing customer experience will also be an important factor to secure market share.

‘While price competition is a key decider for where consumers shop, smaller factors such as popular collectibles campaigns can go a long way to both protect market share and attract new customers”.

In the report, Youl said the revenue in the Supermarkets and Grocery Stores industry is expected to grow at an annualised 2 per cent over the five years through 2025-26, reaching $134.1 billion.

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