Woolworths is gaining on Coles, but both are losing out to ALDI and IGA.
By David Burton.
The latest Shopper Pulse research from Colmar Brunton shows that Woolworths is gaining on Coles when it comes to the share of spend it gets from shoppers.
At the same time, some consumers are reporting higher prices on items in their baskets, although nearly 60 per cent of those surveyed have not noticed higher prices for groceries at their regular store.
This news comes as food sales are growing month by month, according to the Australian Bureau of Statistics (ABS), albeit at low rates, which doesn’t help retailers investing heavily in store rollouts and upgrades.
The latest data available – for November last year – shows that Australian retail turnover rose 0.2 per cent in the month, seasonally adjusted, according to ABS’ retail trade figures. This follows a rise of 0.5 per cent in October 2016.
In seasonally adjusted terms, there were rises in food retailing (0.4 per cent), clothing, footwear and personal-accessory retailing (1.7 per cent) and household-goods retailing (0.2 per cent). There were falls in cafe, restaurant and takeaway food services (-0.8 per cent), department stores (-0.3 per cent) and other retailing (-0.1 per cent).
There were rises in NSW (0.5 per cent), Victoria (0.4 per cent), Queensland (0.1 per cent),Tasmania (0.1 per cent) and the Northern Territory (0.3 per cent). However, in the two states whereALDI launched in 2016, the retail trade in general declined – in Western Australia by 0.6 percent and South Australia by 0.4 per cent.
In current prices, the trend estimate for food retailing rose 0.4 per cent in November 2016. By industry subgroup, the trend estimate rose for Supermarket and grocery stores (0.3 per cent), liquor retailing (0.2 per cent) and other specialised food retailing (0.1 per cent).
Online retail turnover contributed 4.1 per cent to total retail turnover in original terms, so it is still a small piece of the pie, and even smaller when just groceries are considered.
Woolworths now to focus on supermarkets and liquor
The big news in late December was the Woolworths deal to sell off its petrol business to BP (subject to regulatory approval).
This will put about $1.8 billion into Woolworths Group’s coffers, and allow it to spend on its supermarket operation, which has already started to turn the corner. It may also invest in BIG W to revive its standing in general merchandise.
When rating Woolworths on its pricing, according to the Shopper Pulse survey, slightly more consumers noted prices going up rather than down. The good news for Woolworths is that 58 per cent said that prices had stayed the same.
Woolworths is still attracting less of the grocery-dollar spend than Coles. For every $10 spent at the various retailers, Woolworths gets $2.89 versus Coles’ $3.27.
The 38-cent gap on Coles is down considerably from February 2016, when $1.12 extra per $10 spent went to Coles.
So, Woolworths has picked up its game, although Coles hasn’t necessarily dropped its bundle. Woolworths’ price-value improvement had to resonate sometime.
However, the battle of the loyalty-rewards systems at Coles and Woolworths puts the latter at a disadvantage still. “I have changed from Woolworths to Coles for the flybuys and click-and-collect options,” said one shopper.
Pricing, range, store ambience and loyalty are all a fine balance, especially when flybuy dollars have become a currency for some.
ALDI and IGA – the perfect partners?
As the Shopper Pulse survey showed, both ALDI and IGA have gained share of the grocery dollar at the expense of Woolworths and Coles.
Some might argue that ALDI and IGA stores are perfect partners. Match ALDI’s narrow range, lowerSKUs on meat, produce and bakery with the wide range of brands in a typical IGA, and for the smaller IGAs, a top-up shop from ALDI shoppers is the ideal extra sales boost.
For every $10 spent on groceries, ALDI received $1.36 and IGA stores gained 73 cents. The shares of spend have risen for both retailers over the past three Shopper Pulse surveys on this specific measure.
On a ‘back-of-an-envelope’ calculation, based on the ALDI and Woolworths share of grocery spend recorded in this survey, ALDI is not too far off achieving half the Woolworths spend – with fewer than half the number of stores. The responses from panellists give clues to the ALDI success story in Australia:
“ALDI has been cheaper, with better-quality products, since I have been shopping at ALDI from the first day of ALDI trading.”
“I am now buying some products at ALDI which I used to buy at Woolworths, Coles or IGA.”
“I am still currently shopping at my usual shops … However, I will be shopping more at ALDI in the new year.”
ALDI’s success is all the more striking given that it is still lacking in national coverage, despite opening more stores in its original markets.
The full benefit of its move into WA and SA will be fully reflected in a few years’ time, as more ALDI stores open in the suburbs in those states.
And for the Metcash and IGA team, the switch from Coles and the glowing endorsement of this IGA shopper will be music to their ears: “I have changed from Coles to IGA, as I found the IGA had a better range and it was easy to get around the store.”
Costco gaining share of the grocery spend
Costco is expanding more slowly than it would like. The next store to open in Marsden Park, western Sydney, will increase its total store count to nine.
This will give Costco three stores in Sydney, three in Melbourne, and one each in Adelaide, Canberra and Brisbane. Based on this limited footprint, and this survey, Costco has increased its share of the grocery dollar amid being famed for its meat, seafood and gourmet foods.
Costco is still ranging roughly 3,400 SKUs and its Treasure Hunt specials lure shoppers into its warehouses in a similar (but less frequent) manner to ALDI Special
Buys for the disruptive discounter. Costco is still keen on minimising the number of varieties from each particular supplier. Instead it provides brand variety across departments to keep its members interested in shopping Costco on a regular basis.
Over time, Costco will increase its share of the grocery dollar from new openings and by encouraging its members to increase their frequency of visits through catalogue specials.
“I bulk buy at Costco a lot more often and only buy things on special,” said one Shopper Pulse panellist.
Share of the shopper portfolio
FoodWorks, SPAR and specialist retailers all make the list. Although their individual share of the spend isn’t significant, each showed growth in this survey. Collectively, they totalled about 15 per cent of grocery purchases, and there is scope to chip away at the top four through offering convenience, improved formats and becoming the local champion where appropriate.
FoodWorks is rolling out three new store formats this year, each catering to a different target market, which will be reflected in the stores’ core ranges. The complete changeover is expected to take about 12-18 months.
In among ‘the rest’ are farmers markets and those traditional markets that have served shoppers for decades. Adelaide Central Market celebrated its 148th year on January 28.
While there is a large Coles supermarket within the Central Market precinct, the wide range of available products from stallholders is part of the reason for the Adelaide institution’s success.
Whether it’s the Mettwurst stall or The Smelly Cheese Shop, the Latvian Kitchen or Barossa Fine Foods, the market offers many reasons to shop for food and perhaps visit Coles for non-food items.
A recent addition to the market is Jamface Central, owned by TV chef Poh Ling Yeow. Products include sweet baked treats, pastries, jams, relishes, sandwiches, soups, stew, coffee and juice.
Adelaide Central Market also has more fruit and vegetable stalls than you could poke an extremely large stick at – 20 in all, including lots of specialists.
The final verdict
Shopping preferences are personal. What one finds acceptable, another dismisses as unsuitable. Balance is what counts. About 60 per cent of shoppers surveyed visit the same top-four retailers with the same frequency as usual. But, voting with their feet and wallets, some shoppers are deserting one chain for another, buying more generics and fewer brands, or just shopping less frequently, which can also mean spending less.
Frugality hasn’t gone away, and Australia has a massive foodwastage problem, which needs to be worked on.
The concept of buying, if possible, just what you need and no more, and avoiding specials that you won’t eat by their use-by date, is also driving the spending patterns that retailers can expect this year. Leftovers for dinner, anyone?