With the changing dynamics of an increasingly competitive and unique grocery market, Australian retailers continue to drive strong growth, relative to their counterparts in other developed nations. However, despite a highly concentrated network of supermarkets, there remains much headroom to sweat more from existing bricks and mortar assets across all channels.
International retailers creating more choice
When writing any article about Australian grocery it is always easy to start with the 'Big 2' retailers, Coles and Woolworths. However, from a channel point of view, over the past five years it has been the growth and entry of international retailers, Aldi and Costco, that has started to change the shape of the market away from one that was purely focused on traditional supermarket formats. Aldi and Costco are carving out their own channels in Discount and Members Club Cash & Carry, bringing refreshingly distinct offers, international brands and a different shopper proposition to the market. Both retailers are proving popular with Australian shoppers and are therefore seeing exceptionally strong growth. Consequently both are looking to grow their networks in the geographies in which they already trade, as well as expand into new states and territories.
Coles and Woolworths looking to drive loyalty through destination appeal
Although Coles and Woolworths continue to maintain market share despite the growing popularity of Costco and Aldi, they are doing this as they are working harder than ever to deliver improved in-store environments and re-invigorate growth in their existing estates. However, on top of this we are starting to see a more distinct identity between the two.
Coles is coming towards the end of its five year turnaround strategy, a period where it has effectively looked to fix its operational issues and deliver a business that can match its main rival in key areas such as price, range, operational efficiency and fresh food. However, its new second phase of transformation, on which it is about to embark, is very much about differentiation. The retailer's new format store at Southlands, Melbourne gives a flavour as to what this might look like with additional services, standout fresh food, counters that 'wow' the shopper and a step change in the in-store environment.
Woolworths, on the other hand, in the first half of this year has increased the number of stores it is refurbishing. In some of its newer formats the retailer continues to focus on fresh food and customer service, however we are starting to see initiatives that help navigate the shopper around the store. Using departments like health and beauty, its new My Kitchen range and a gifting section, at the front of the store, it is creating in-store zones and bringing more authority to the wider grocery offer.
7 Eleven focused on forecourt convenience
Convenience retailer 7 Eleven in the past few years has significantly increased its coverage with the acquisition of c.200 Mobil petrol sites. Unlike Coles and Woolworths petrol sites, where the retailers are more focused on driving fuel sales ahead of merchandise sales. 7 Eleven is focused on driving merchandise sales first and fuel second. This is creating a different dynamic to the forecourt-orientated convenience channel that exists in Australia and 7 Eleven is delivering a format with a number of distinct offers which include fresh food-to-go, $1 coffee and its highly successful Slurpie iced drinks.