by PTidey 213537711
Whether your preference is to shop online or zigzag through each aisle, supermarkets are essential in most household to get necessary commodities required from week-to-week. With the average household expenditure on food and non-alcoholic beverages alone around $200 per week (2010 statistics; ABS statistics), it is imperative for households to shop around for a supermarket that offer the right price however also meeting their personal needs.
GAME IS ON!
Prior to 2001, Coles and Woolworths had the duopoly for available supermarkets as other independent supermarket franchises or local convenient stores were no match when comparing pricing and availability of a range of essential items. It was much easier to monitor each competitor’s store and implement ‘game theory’ to retaliate to each other’s competitive pricing strategy typically through promotions or price cuts as a short term goal for increased sales revenue (Iacobucci, 2014). These price fluctuation was a means to increase people entering the stores, however not necessary as an on-going marketing strategy as these price cuts or promotions may not lead to on-going loyal customers, however only those in for the sale.
Then Aldi come along and became a contender for some market space to Coles and Woolworths, ensuring each of these leading supermarkets re-evaluated their marketing and pricing strategies. Aldi’s strategy was to offer ‘low prices on the best quality products’ by means of simple and transparent prices (Aldi, 2016). Savings on groceries were achievable through reduced costs spent in other areas of service provided to their customers. This includes layout of the stores where items are arranged in store on their pallets instead of neatly packed on shelves, through to speedy processing at the checkout with customers required to ‘bag’ their own items.
Even though the duopoly has the lead in overall market shares, having more players on the market allows for both Coles and Woolworths to up their game by not just focussing on maximising profit margin which seemed to be a tactic used by Woolworths back in 2008 (Knight, 2015) when Coles was newly acquired by Wesfarmers and were being re-established. This Woolworths pricing strategy seemed to be a short-term strategy. As it shifted the focus away from their customer’s interest and needs to their own profit maximising instead; this gave Coles an opportunity to catch up now establishing a competitive advantage over Woolworths.
From the 4P’s marketing strategy, ‘price’ is the only variable that generates revenue therefore it is imperative for companies to determine early on what their main objectives are and a strategy on how to achieve these (El Husseini, 2014). For example, Coles ‘Down Down’ everyday low price strategy, as well as customer service they provide, seems to have been an effective strategy at establishing them as a lead player in the share market.
THEN CAME ALONG COSTCO
Costco opened its first doors in Australia in 2009 (Costco, 2016). Not a supermarket as such, but instead a warehouse, however able to provide customers with their daily grocery essentials plus more. They too operate on a low cost pricing strategy, offering customers what they need with a very low profit margin attached. They achieve most of their profit margin from requiring the customers to pre-purchase annual $60 memberships or being invited by a friend before being allowed in the stores. They also sell everything in bulk, requiring their customers to buy large quantities of essential items regardless if required or is later wasted.
WHAT’S IN IT FOR ME?
Each supermarket (or warehouse) caters for different household needs offering different pricing strategies, therefore one company may not suit everyone’s needs nor are we required to only commit to the one supplier. My personal preference is to shop at Coles because I know I can find what I need, in the required brand as well as give me an option to review promotions (for items that I am not so brand loyal with). I also am a member to Flybuys loyalty card that provides added bonuses buy redeeming points for rewards. Yes they are more expensive than ALDI and Costco, however I do not have a great amount of spare time to be wasting in line and would prefer to choose my brands of items and only buy non-perishable items in bulk when required not be required to buy all my items in bulk.
Abs.gov.au. (2016). 6530.0 – Household Expenditure Survey, Australia: Summary of Results, 2009-10. [online] Available at: http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6530.0Main%20Features22009-10?opendocument&tabname=Summary&prodno=6530.0&issue=2009-10&num=&view= [Accessed 3 Sep. 2016]
Iacobucci., (2014). Marketing Management. Cengage Learning
Aldi.com.au. (2016). Pricing – ALDI Australia. [online] Available at: https://www.aldi.com.au/en/about-aldi/customer-information/pricing/ [Accessed 3 Sep. 2016]
Knight, E. (2015). Survey terrible news for Woolies. [online] The Sydney Morning Herald. Available at: http://www.smh.com.au/business/comment-and-analysis/woolworths-report-card–plenty-of-room-for-improvement-20150625-ghxo9q.html [Accessed 5 Sep. 2016]
El Husseini, S. (2014). EDLP versus hi-lo pricing strategies in retailing
Clipartkid.com. (2016). Supermarket Clipart Black And White Clipart Panda Free Clipart – Clipart Kid. [online] Available at: http://www.clipartkid.com/supermarket-clipart-black-and-white-clipart-panda-free-clipart-azSZ0w-clipart/ [Accessed 6 Sep. 2016]