Executive Summary : The Australian Supermarket Industry

Two statements concerning the criteria of price takers were asked to the local retailers, Harris Farm, IGA and Mario’s Market, specifically five managers as they can be considered a knowledgeable source of the firm’s operations. These questions were asked as they directly illustrate the influence of Coles and Woolworths. However, a limitation exists in the questions as it is naming Coles and Woolworths a “competitor” forcing retailers to think in a more biased way leading to a collection bias.

Bigger supermarkets can afford to give unbeatable offers due to buying in mass quantities cheaply and also the fact that most supermarkets are out of town offering easy access and everything under one roof. Our choice of supermarket is often ruled by our friends/work colleagues due to class distinction if we shop at the cheaper one noses get turned up, if we shop at the more expensive questions are asked ‘how can you afford . ‘Supermarkets/stores enticing you in through their doors goes back to the industrial era, where the early department stores first opened up to the wealthy seducing them with a variety of goods that before could only be bought from specialist people, it then progressed to letting the poorer working class in through the doors i.e Selfridges opened its doors to the wealthy then decided to hold the Penny sale days where the poorer could have a taste of the luxuries they sold, Woolworths then came along and catered for all walks of life. Slowly over the years the big stores have taken custom away from the smaller ‘corner’ shop causing many to close down due to too much price competition, many people preferring to go to the bigger shops

The conclusion to this essay according to the acquired data, resolute to Coles and Woolworths operating in a duopolistic Australian grocery market. Both firms have had an impact on the price of local retailer’s fruit and vegetables through the imposition of lower prices to match the competitive prices by the duopoly or by increasing prices to differentiate their products to consumers. A wide range of evidence supports each duopolistic characteristic which obtains direct correlation to price determination, whilst validating the basis for other possible market structures to be non-applicable. Lastly, this essay has found the reaction of altered pricing strategies by each firm on consumers however further investigation is required.

The entry barriers for the supermarket industry are high. The main challenge for a new entrant is the cost of capital. The largest capital for a supermarket would be its facilities. A new entrant also would have to consider its economies of scale. Economies of scale are achieved through large volumes of production which results in low costs, which can be difficult for a new entrant. Another challenge for a new

Woolworths and Coles strong power is becoming the deciding factor of Australia’s economic health. Both of these are supermarket giants which are eliminating the competitors from the market and, the local manufacturers and farmers are also feeling pressurized. 1 They have brought in the position of duopoly in the market wherein for certain service, industry or commodity only two suppliers, businesses and organizations dominate. Woolworths and Coles are squeezing the supplier’s margins as their market share is growing continuously. 80% of the share of the Australian grocery market is held by both of them together and globally also they hold unique positions. 1 With 96% of the active trading business and employment to over five million Australians, small businesses highly contribute to the Australian economy. The small local shops struggle to compete and the consumer’s favourite brands disappear in duopoly which is prevalent now. The two supermarket giants

The retail grocery landscape is changing and will continue to change. Retailers no longer expect shoppers to come to them, they must go to the shoppers, especially when Millenials are the shoppers of the future with a multitrillion-dollar opportunity for the grocery industry by 2020 (Guskey, 2014).

As supermarkets and the additional ownerships of Woolworths do not exercise strategy on a single or niche market but based on general customers consisting of individuals satisfying their needs, Woolworth’s main customer groups may be distributed in two different groups. The wealthier group that consists of a higher quality of living due to their higher annual income and a poverty or less-wealthier level group due to their low income. Both groups could be separated by a median salary split based on the latest available data from statistics. Possible influences of income level may be demographical and geographical in which the combined will determine which group customers belong to. There are different ways in which the customer groups may exercise their influence, the difference is mainly based on which group customers belong to.

Demographic changes such as the aging population, an increase in female workers and a decline in home meal preparation mean that UK retailers are also focusing on added-value products and services. In addition, the focus is now towards; the own-label share of the business mix, the supply chain and other operational improvements, which can drive costs out of the business. National retailers are increasingly reticent to take on new suppliers (Clarke, Bennison and Guy,1994; Datamonitor Report, 2003).

One large thing that all companies in the grocery store industry must do is focus on meeting the needs of the new generation of buyers. The “millennials” are the future decision makers in households and they will have the disposable income and have the choice on where they want to spend their money. Baby boomers are starting to age and soon most baby boomers will be on a fixed income and will not have the choices that millennials will have. Millennials want convenience and are variety to choose from (2012). The progression of baby

Supermarkets are well thought out establishments that a majority of Americans rely on. A certain science contributes to every product, end cap, and shelf being placed in every store across the entire world. Supermarkets prey upon customers’ attractiveness to sales. Extensive research has been compiled to show what a person will buy and why. Stores tend to place high profit products on end capes. Supermarkets’ try to influence customers to buy the products that will earn the store the most money. There is no coincidence the products we mostly buy are located in the back of the store. Large stores offer deals and sales on the products they want, so a customer will most likely purchase more. Stores offer thousands of different

Discount grocery retailers have witnessed significant sales growth over the past 5 years since consumer had to tightened up their budget due to economic recession which have led many middle-income and affluent consumers to shop in places like Lidl or Aldi. A price war between the leading supermarkets chains abd discount stores had started. Discount shops demand an increasing market share of all UK grocery sales, as the social stigma associated with them have been changed and the discounters started to launch premium product ranges to appeal to the luxury marketplace.

The supermarket wars has been increasingly frustrating for consumers as sometimes consumers tend not to know where to get the best deals, as they all advertise the same price and brands, in the UK companies such as Tesco and Asda advertise and sell the same products but also claim to low on prices for the customer satisfaction, but in fact they charge more when it comes to their own brands, looking in the telecommunication sector is clear that with the privatization of the telecommunications industry, the mobile phone industry experiences transformations that enhance the dynamics of competition.

According to demographic analyses conducted by Herard Scotland in 2010, UK has an aging population, meaning that there are less young people than retired citizens. This is a concern for supermarkets since older generation is less willing to shop for groceries. In addition, this has an effect on Tescos online shopping division, since retired people (over the age of 65) can prove to be reluctant to use internet services.(Turban at al., 2010)

The market is currently well on the mend, with unemployment rates decreasing and overall incomes increasing. With this increasing upward mobility, consumers want to buy more and more, as many US citizens measure their prosperity on how much you can buy (Gondor, 2009). Already emerging is the demand for organic foods to be sold in conventional grocery stores, as they are available in 3 out of 4 conventional grocery stores (Greene, 2016). Considerable draw to certified organic food because consumers associate organic with higher quality (Ploeger,

continuous growth in the grocery market; however, the rate of growth is declining, leading to higher levels of