The divide between Coles and Woolworths are growing – so what does this mean for shoppers? <\/p>\n
Australia\u2019s cosy supermarket duopoly is suddenly in an uncomfortable position<\/a>. The big two, Coles<\/a> and Woolworths<\/a>, who are used to ruling over the lives of Australian shoppers \u2014 and local suppliers \u2014 find themselves in very different circumstances.<\/p>\n Coles<\/a> is soaring, booking strong profits and keeping customers happy. Woolworths is struggling<\/a>, slashing its dividend, watching shoplifters run riot<\/a>, and experiencing slumping profits.<\/p>\n In the last two days the big two reported their results to the market and the contrast could not have been more stark.<\/p>\n Woolworths had its worst single day in the markets in years, falling a shocking 13.3 per cent.<\/p>\n That\u2019s a huge move in such a large company.<\/p>\n Coles stock, by contrast, was rewarded with its second-best day ever, seeing the stock rise 8.5 per cent.<\/p>\n As you can see, this is rare.<\/p>\n The two companies usually mirror each other. (That\u2019s what a dupoly is<\/a>, right, a cosy situation where they all float along together.)<\/p>\n But now we have a chasm emerging.<\/p>\n Note that Coles Group includes Coles supermarkets and Liquorland, whereas Woolworths Group is a bit broader. The group includes the supermarket and Dan Murphy\u2019s, but also Big W and Petstock. The big moving parts in both companies, however, are the supermarkets.<\/p>\n This could be the end of an era.<\/p>\n A bit like the collapse of the Soviet Union, or the inability of NSW to beat Queensland in Rugby League in the decade after 2006.<\/p>\n A rivalry in balance is now out of balance. The Yin has lost its Yang.<\/p>\n So how will Australians fare?<\/p>\n Are we about to get whacked by a single supermarket holding a triumphant monopoly position?<\/p>\n Or will a brutal round of competition break out as Woolworths scorches the earth to catch up to its rival?<\/p>\n Coles is making huge investments in new automated delivery centres<\/a> to make big progress on home delivery.<\/p>\n That was an area where it really lagged Woolies, and now it is catching up with a vengeance.<\/p>\n If they can combine happy customers with great delivery they might be able to make the gap with Woolies even bigger.<\/p>\n Here\u2019s what Woolies have promised:<\/p>\n A smaller range of products, to make shopping simpler.<\/p>\n Fewer specials and instead more consistent low prices which they call \u201cLower Shelf Price\u201d.<\/p>\n Some new fancier Home Brand products.<\/p>\n And, um\u2026. No, that\u2019s most of it.<\/p>\n \u201cThis is about a long term strategy for us,\u201d said chief executive Amanda Bardwell<\/a> in a call with analysts on Wednesday.<\/p>\n \u201cWe want to see a better balance in terms of Everyday Low Pricing \u2026 and our specials program.<\/p>\n “We\u2019ve shared today also that we\u2019ve seen some really pleasing early signs of customers recognising increased value for money at Woolworths.\u201d<\/p>\n Story Continues <\/p>\n Does that sound like fiddling round the edges to you?<\/p>\n No wonder the market plummeted.<\/p>\n Now, Woolworths remains the bigger supermarket.<\/p>\n It has 1301 outlets in two countries, Coles has 860 and is just in Australia.<\/p>\n The Fresh Food People aren\u2019t about to disappear.<\/p>\n But what they need is a battle plan to win back our hearts and minds.<\/p>\n Back in about 2010, Coles launched the Down, Down campaign, and it was one of the most powerful brand investments ever.<\/p>\n Coles – which was owned by Wesfarmers back then – went from being dominated by Woolworths to leading, for almost a decade.<\/p>\n While later Woolies got ahead by investing in better home delivery and a great website, the lesson of the Down Down campaign will be extremely relevant as Woolies tries to figure out how to win back customer loyalty. If there\u2019s one strategy that can tap into Australians souls, its massive discounts.<\/p>\n Aldi is making money,<\/a> thanks very much.<\/p>\n The German discounter has settled into a comfortable niche recently and is sending profits back to Mulheim in Germany.<\/p>\n Aldi Australia boasts the most satisfied customers<\/a>, and it is coasting.<\/p>\n Forget growth, let\u2019s profit.<\/p>\n Aldi has a recent press release boasting about opening its 600th store.<\/p>\n \u201cOur customers have embraced our business model and have developed a love for our quality products,\u201d said Jordan Lack, Chief Commercial Officer at ALDI Australia.<\/p>\n But .. they had 595 stores a year ago.<\/p>\n Their era of hyper growth \u2014 at one point they were opening 8 stores a year \u2014 appears ro have concluded.<\/p>\n Instead they seem to be relying on more people coming to each store.<\/p>\n Coles stock price has surged ahead of Woolworths. \u00b7 Jason Murphy <\/p>\n
The lesson of the Coles ‘Down, Down’ campaign will be extremely relevant as Woolies tries to figure out how to win back customer loyalty. \u00b7 Coles <\/p>\n