Woolworths has bee struggling recently due to heightened competition from Coles and ALDI causing their sales to continue to decrease. In an attempt to prevent the haemorrhaging of sales, the supermarket is planning on doing a complete overhaul of its pricing to bring its products in line with competitors.
Brad Banducci, the chief executive of Woolies made an announcement that the group will be restructuring after a drop in sales of 0.3% in the third quarter, during which time both ALDI and Coles experienced growth. This has resulted in Woolies pumping $150 million into reducing prices, which only means that customers may be able to save more money shopping with them in the coming months.
Over the past nine months Woolworths has pumped $400 million into reducing prices but that money hasn’t won customers over just yet. The additional $150 million that is has just sidelined to invest will be focused on improving prices, customer service and loyalty.
The supermarket's main aim is to reduce prices across the board, making the biggest reductions on products that have the highest margins. Woolworths food and liquor sales also declined 0.9% in the 13 weeks running up to the end of April, whereas Coles reported a 4.9% increase in comparable sales for their third quarter.
One of Woolworth’s new strategies will be to create loss leaders to ensure it beats its competitors, which basically means it will sell items such as milk, bread and chicken at a loss to get customers through the door. Suppliers will also be rallied up to negotiate better trading deals on everyday products e.g. spaghetti and other pastas. Coupled with this there will also be an introduction of more enticing weekly special offers.
If reduced prices weren’t enough, the supermarket has also chosen to focus on communication. Coles ‘down down’ campaign appears to have convinced customers that it’s the cheapest, whilst ALDI customers know that they are getting bargains on the chain's overseas brands. This is an area where Woolworths has struggled to captivate its customers imagination, so in efforts to tackle this Woolies will be making sure all customers are aware of their top offers.
While this is great for customers, because the company will be reducing prices and offering more opportunities to save money, expect to be bombarded by numerous end-of-isle promotional campaigns - hopefully without the slightly annoying ‘cheap cheap’ catchphrase everywhere.
This is great news for customers, but if you are an investor then you probably wouldn’t have been too happy to hear that the company expect to make a loss this year as it sifts through the unproductive inventory in its product range. However, under these same efforts you will be able to see discounts at Big W.
Lets Get Local
In increased efforts to improve value, Woolworths wants to make each store as relevant as possible to its customers. The company wants to try and compete at a local level by meeting the needs of local customers rather than trying to be a one-size-fits-all supermarket. Retail doctor, Brian Walker mentioned in a statement that customers are moving away from one big shop per week and more towards basket shopping which means they visit 2-3 times per week for smaller shops.
This change in approach means that supermarkets can’t simply have one wide, cheap range to suit all customers. Certain consumers want better quality and cheaper prices at their local store. Woolworths will be paying closer attention to the UK’s supermarket industry which has successfully accomplished this. Tesco is a prime example where the brand has adopted segmentation by local areas and broken down its product offerings by; gender, ethnicity, urban or metro.
Receiving help from staff at Woolies has also been a gripe with many customers, so expect there to be investment into staff and training in efforts to improve your customer experience.
One final thing that I liked was the supermarket's intentions to better utilise space within its outlets. There have been some considerations to increase deli section size or even lease out butchery sections to local farmers.
The Golden Years
Australian supermarkets in recent times have been experiencing some of the highest profit margins compared to the rest of the world. But things are starting to change with the emergence of online shopping and the presence of ALDI. There are also rumours that the other German discount supermarket LIDL might be planning an Australian invasion to join the pricing war.
Woolworth’s profit margins used to sit at 8% whilst the rest of the world's average margin was between 2-3%. Thus, it’s about time competition began driving down our supermarket prices in my opinion. If you have been on the search for cheaper products or better value for money then over the course of 2016 make sure you check all supermarkets as this battle unfolds. We'll also continue to keep all of you updated on the latest Woolworths deals/offers and promo code discounts via posts on the Buckscoop Deals and Vouchers pages.