Friday, May 31, 2024

Satisfied customers are necessary for growth

Without a monopoly, keeping customers is critical. 

By David Burton. 

“What does get up the nose of some shoppers is the queues at the ALDI check-outs.”

Times are tough in grocery. Profit is harder to make, Successful promotions more difficult to come by and volumes declining in some categories. What should retailers do about all this?

Is it a fact that retailers really ignore a segment of the potential market? Maybe they are just inefficient at times, or refuse to care about servicing a certain part of the market. This month’s Shopper Pulse has some insights into the mindset of the supermarket customer.

When it comes to spending on groceries the two major chains take in the lion’s share of our collective national budget, followed by ALDI and Metcash retail outlets and, increasingly, Costco. The majors compete on a daily basis to get consumers through the doors, but do they satisfy their customer base? The short answer is yes.

The most satisfied of customers 

No chain leads hands down for complete satisfaction ratings. The most mentioned companies in this latest Shopper Pulse survey are Coles and Woolworths. To a lesser extent ALDI and IGA received mentions, but he big beef at ALDI is for having to pay a deposit for a trolley. Sure, it’s refundable, and a few other stores have the same system, such as Woolworths’ Norbrik store close by its head office in Sydney.

However, it is often inconvenient to take the trolley back after loading up the chariot with groceries, including ice-cream and other items starting to melt and breach the cold chain protocol.

Supermarkets spend millions of dollars to drag shoppers through their doors, so eliminating behaviour that will alienate customers ought to be second nature. However, this is an industry where top-down commands aren’t always what the troops believe in.

What are the issues at Coles and Woolworths? 

The problems nominated for Coles and Woolworths are different, which would reflect each respondent’s unique store. Not all stores are created equal, though, and for this one only needs look at Coles. Now with 755 stores, of which 58 per cent are in the new ‘super fresh’ format, the offer at one of these stores versus an older Coles can be very ‘chalk and cheese’.

Coles has less range than Woolworths, according to the panelists. They don’t like that. On the other hand, shoppers at Woolworths find too much choice and too many products. There’s a fine line and we are in danger of overstepping it. The ‘just right’ range in any department leads to increased sales because consumers baffled by too much choice will move on without buying anything.

Coles shoppers are concerned because they don’t know when ”my brand will be on promotion”. Maybe there is too much ‘Down, down’ effect to notice or their products are no longer promoted with the same frequency. This is supported by another top Coles problem: they “rarely have the special products that I want to buy”. In spite of around four years of the ‘Down, down’ campaign, the top complaint, from 30 per cent of the panel, was “Coles is too expensive”.

Woolworths, on the other hand, has a problem with queues at the check-out, and while many Woolworths stores are overtrading, customers don’t want to feel neglected as they wait in what, at times, seems like never diminishing lines.

Damaged trolleys got a mention in regard to Woolworths, yet not at Coles, and for whatever reason, 13 per cent of the Shopper Pulse panel thought Woolworths has “mostly non-Australian products available”.

Rewards get a mention at Woolworths

Among the comments regarding reasons for satisfaction with Woolworths, panellists mentioned the great range of specials and rewards as well as decent promotions, a good rewards program linked to Qantas Frequent Flyer and improved store offerings (although coinciding with a decreased range of brands). Woolworths has worked hard on its rewards program and would be pleased with this recognition.

Coles has also has dovetailed its Flybuys into the lives of many of its customers. There are 6.5 million Flybuys members, but not enough mentions in this latest research to rate a mention.

The way of the future will be driven more by the way both the majors use their rewards schemes now that fuel discounts are voluntarily restricted. And as each parent company looks to drive its supermarket customer towards its other retail offers, there is an opportunity to push divisions in need of help.

My own experience with the rewards scheme at Coles and Woolworths has recently seen offers for Target (it’s behind its prior year on sales), Liquorland (it is lagging the Woolworths liquor offer in performance) and at BIG W, which Woolworths is trying to encourage its rewards customer to lift back to former glory.

Fresh – or is it?

There is a major opportunity for Woolworths to reinforce its Fresh Food credentials, particularly when it puts on the full theatre and its ‘showtime’ in fresh departments. Coles quietly goes about offering good produce and outstanding produce in some places, but it doesn’t promote it the way Woolworths does.

Coles was nominated as having poor-quality seafood by 16 per cent of respondents, while at Woolworths buying spoiled food came up in the responses to the survey.

In the meat department at Woolworths, earlier initiatives such as the MSA standard label on Woolworths beef was recently augmented by its premium house brand Gold, and this range is ‘super premium’. The addition of Jamie Oliver-themed products has also increased the potential satisfaction for Woolworths shoppers. There were no complaints about fruit and vegetables from Woolworths shoppers in this survey, and there have been large quantities of good-quality produce available.

A question for future panelists will be centred around what happens when we are encouraged to buy more ‘ugly fruit and vegetables’. Those are the ones that will be great for eating or cook well, but look gnarled or spotty.

IGA ramps up ‘fresh’ 

The future is fresh and has been recognised by the Metcash senior management team. This has been enunciated by CEO Ian Morrice as he leads the way forward with an emphasis on increasing convenience division sales while, at the same time, helping Metcash’s IGA retailers increase their profile in fresh departments. This is a good thing, because 31 per cent of customers in the Shopper Pulse survey thought IGA had poor-quality fruit and veg.

The sample number was small, but it should be noted that IGA has a much lower market share than the chains. The concern about produce quality is not reflected in many of the IGA stores that have championed the department and many stores that I have covered have top-notch fruit and veg, many with a wide and diverse range.

The challenge for Metcash is to bring ‘the ordinary smaller IGA’ up to scratch. This is definitely a major priority as the former strategy to take Metcash buying expertise into the franchised Harvest Market rollout has been put on hold because getting more IGA stores competing better on fruit and veg, and other fresh departments, is more beneficial to Metcash. It is more urgent in the short term.

Apart from the abovementioned issues, IGA shoppers are satisfied and gave no rating for dissatisfaction. In comparison, Coles, Woolworths and ALDI do rate a small percentage of unsatisfied respondents.

ALDI is on the way

WA and SA do not currently have an ALDI operation, but all this changes in 2016, and both chains and independents have the chance to reinforce their local offers in the meantime.

One thing that is not a concern at ALDI is produce, of which no mention was made by the panellists. ALDI is well known for good-quality fruit and veg in a compact range that meets the needs of the average household. Similar story with ALDI’s meat offer.

What does get up the nose of some shoppers is the queues at ALDI check-outs and the need to feed trolleys with $2 coins. It’s also thought that the staff are largely rude and that there’s a lack of anyone to ask for product information or whether items are in stock.

Conversely, ALDI was praised for “great products at great prices”. The general thrust of positive comments around ALDI include its limited range, which makes shopping faster and more efficient: “Quick, easy and good quality for low prices”. This theme is sure to resonate in the new markets that ALDI is gearing up to launch in.

“I am satisfied with ALDI because everything there is cheap and affordable”, was a verbatim comment. While ALDI might prefer the word ‘value’ to ‘cheap’, it is easy to get the drift of what these shoppers want. As one panelist so aptly put it, ALDI “has most things I want. When it doesn’t, I go to Woolies”.

This is the business model that ALDI chooses. Not everything is available, but most things are. The chains, both Coles and Woolworths, plus the specialty stores, are increasingly close by where ALDI chooses to enter shopping centres, as opposed to its stand-alone stores.

No matter which retailer ,there will always be something not up to scratch on any given day. The challenge is to minimise the reasons for customers not to come back.

Related Articles

Stay Connected


Subscribe to our newsletter

To be updated with all the latest news, offers and special announcements.