There’s no doubt that Australian supermarkets are evolving into a diverse, sophisticated and customer centric sector, and we explore this evolution here. We also examine the marketing strategies being used, with industry experts suggesting the best way to partner with retailers, suppliers and wholesalers with a view to piggybacking on the current market moves.
By Peter Howard.
What are the options?
In its 2019 report, ‘Competition and profit margins in the retail trade sector’, the Reserve Bank of Australia reported net profit margins had declined for both food and non-food retailers due to heightened competition in the sector.
“Firms are seeking to offset the decline in margins through measures such as vertically integrating supply chains and adjusting product mixes,” the report said.
Today, these are exactly the marketing measures we’re seeing, each consistent with the Ansoff Matrix marketing model taught in business schools:
Market penetration
Increasing sales of an existing product in an existing market by penetrating the market further, usually by promoting the product heavily or reducing prices. Coles and Woolworths initially tried market penetration to compete against ALDI.
Market development
Selling existing products to new markets, such as targeting a wider catchment area or launching an online sales channel. Supermarket chains can open stores in new locations to develop their market.
Product development
Introducing new products to existing markets – a common strategy with supermarkets and their suppliers. It can be new sizes or ranges, such as the private label products currently being introduced in many supermarkets. Unrelated products such as ALDI’s weekly special buys are also a product development strategy
Product development is a popular strategy for smaller supermarkets as it can help develop a loyal customer base and differentiate with a unique value proposition.
Diversification
Entering new markets with new products that can be related or unrelated to a company’s existing offering. A diversification strategy might be used to gain control of the supply chain whereby a supermarket builds its own distribution centres or acquires transport companies to increase control and independence. Alternatively, a supermarket offering fresh sushi to order is adding a fresh international food range (new product) and targeting sit-down dinners (new market).
Read more about the sales & marketing feature in the September issue of Retail World.