Overview of Coles Supermarket and its competitors

Discuss about the Lack of Retail Competition in Grocery Sector.

Coles is an Australian supermarket and one of the two dominant supermarkets in Australia’s retail industry. It is also among the big 20 across the globe (Palmeira and Thomas 2011).The supermarket’s market share is approximated at around 40 percent in Australia. Woolworths which has not been able to be shaken for almost a millennium now also enjoys almost a similar market share. The Coles and Woolworths Supermarkets are both facing a major challenge from the entry of low-cost GermanAldi. Coles has been facing big challenges from its rival Woolworth which outperformed it a decade ago, before getting rescued by Wesfarmers which had enough resources to fund it and rescue itfrom being thrown out of the retail industry (Wardle, and Baranovic2009). The main challenges in the retail industry today  is understanding how to make purchases, insufficient data limiting knowledge of the customer, improving customer experience as many companies still depends on in-person transactions and the industry has  not embraced the web as quickly as advisable. This is a challenge because the modern easiest way to understand state of customer experiences is to use digital marketing (Price 2009). The retail industry also faces a challenge in providing Omni-channel experience to its customers through online integration, in-store, and mobile channels to make information available in all ways about their products with an aim of improving customer experiences across all channels and devices (Sutton-Brady, Kamvounias and Taylor 2015).

Socio-Cultural Factors: there is increased attention towards health and well-being, seen in the movements towards embracing organic produce and healthy alternatives. The sale of organic food is set to rise in the long-term and this provides a good opportunity to Coles Supermarket because there are few players offering organic food in the market space (Bogomolova, S. et al. 2016). This is also a threat which needs Coles to be cautious because farmers’ market and niche supermarkets specializing in that product are likely to thrive in the environment.

The other social trend is the increased number of time conscious consumers. As a consequence, there has been an increased demand for time convenience high (Bogomolova, S. et al. 2016). The ability to provide and fulfill this need is made possible by Coles who are extending trading hours (Thornton et al. 2012). Coles, in addition, has tried expansion of its products range as much as they are able and has been able to create Coles business such as Coles Express.

Challenges faced by Coles and Woolworths Supermarkets

Economic Factors: there are low spending labels in the current economies especially with flexible products and consumers are trying to save through switching to private level brands(Davidson, Timo and Wang 2010). Coles should therefore increase its private label provision offerings to enable it to compete on the basis of price as it realizes its higher margin while it competes on basis of choice convenience, i.e. offering a low priced alternative (Hattersley, Isaacs and Burch 2013),(Nenycz-Thiel 2011).

• Life cycle stage of the retail industry
• Early growth; the retail company enters the market where other retailers exist, invest money into the business and faces little competition and market share rises gradually and profits could be little due to initial capital invested.
• Accelerated phase; the retail market share start to rise and there is an increase in profit. Price discounting is also experienced here.
• Maturity phase; this is the longest stage of a retail company as it tries to establish, sales peak and start to decline. The maintenance of suppliers is paid a lot of attention. If the company fails to survive the completion it enters decline stage.
• Decline stage; the retailer may opt to go back to drawing table or give-up on the business.
• 5 forces analysis
• Buyers power; in retail industry buyers have little or no bargaining power like retailers who buy in bulk but have an alternative to choose the cheapest products that they need from different retail outlets. Choosing an alternative retail outlet is their indirect bargaining power.
• Suppliers power; Lynch, 2009, put it that “If there are only a few suppliers” they have the power over the retail industry. In the UK there are many suppliers retail supermarkets can choose from and this means that the suppliers are many and struggling to get their supplies in the market or supply to the supermarkets. In fashion retail industry, suppliers have less power almost insignificant towards the supply. This is because most retail companies source their products from third world manufacturers who receive too little profits.
• Competitive rivalry; there is little competition in fashion retail industry due to lack of, or, very little innovation in the space, allowing saturation of the similar products and the presence of large numbers of retailers who are selling similar products without forgetting the concepts that allows some to sell at low rates(Richards et al. 2012). Therefore getting into this industry is not very easy at all and this makes fashion retail industry to thrive in the space.
• The threat of new entry. There is little threat of new entry in this industry since there is little that is unique to be introduced in the industry. Unless new entries are able to come up with unique ways to popularize what they produce making their brands even more novel even when nothing special in them. The biggest challenge to new entries, therefore, is high risks, but also high rewards in case of uniqueness.
• Threats of substitution; this retail industry (fashion industry) has little to substitute clothes. There is nothing that replaces clothing and this is an advantage to the industry.

In conclusion, fashion retail industry is unique compared to other industries because of high demand for clothing by all people in all times (Dwivedi et al. 2012). The future of clothing remains bright as demand is not likely to fall. Profit will be a guarantee every time as people increase bargaining power. The emergence of new entrants, Australia’s changing tastes and emergence of new technologies is an emerging stressor in the retail industry.

Coles’ history can be traced back from early 1900, and it is one of the pioneering retail companies in Australians’ Smith Street. The supermarket was founded by George Coles who had a key influence in the retail industry. Coles is currently under Wesfarmers, a western Australian cooperative. The company operates over 750 full-time supermarkets, 2 hotels, 600 fuel and smaller convenience stores. A decade ago it had a turnover of $17 billion before it was taken and started getting funding from Wesfarmers in 2007. The survivability of this company depends on the tight competition it faces from Woolworths supermarket and funding it receives from Wesfarmers. It survives on copying what the rival (Woolworths) is doing and also through lowering prices of its products. It also practices strictness in time adherence and has well-established supply chain through the signing of a contract for fruits and vegetables. The company is a retail and consumer service provider and employs over 100,000 employees (Vella, Gountas and Walker 2009). In 2016, Coles was worth $22.1 billion in assets, $33 billion in revenue and it had an operating income of $1.9 billion (Price 2016).

Woolworths Supermarket is the main competitor of Coles Supermarket and was started in December 5, 1924. It is an Australian general merchandise consumer store and supermarket and has 5 segments under its management (Keith 2012). These segments include liquor & petrol segment, Australian food segment, New Zealand supermarket, general merchandise, and, hotels and home improvements (Richardson 2012). The company has strong fundamentals enabling a balanced mix of growth, profitability, debts and visibility criteria. Woolworths operates more than 873 Woolworths Supermarkets, 527 liquor outlets, 327 other licensed outlets, 600 Caltex Woolworths co-branded petrol outlets and Big W stores (Manton, Room and Thorn2014). It prides in working closely with Australian farmers and growers to manage fresh products to its customers sourcing over 90% of all fresh vegetables and fruits and close to 100% of fresh meat from the farmers of Australia. This makes their slogan Fresh Food People a reality in Australia (Chung and Griffith 2009). This strategy is a big threat to the Coles Supermarket because to get fresh produce from already Woolworths loyal suppliers it will need to double its efforts in meeting suppliers including in their offices, offer higher prices to the supplier which is also dangerous for the company survival. In addition, it will require Coles to entice suppliers with high contracts in an effort to buy their loyalty.

Socio-cultural and economic factors affecting the retail industry

Aldi entrance in the retail industry is causing sleeplessness in the retail environment by offering the lowest prices of products 25% less compared to Coles and Woolworths and other players in the retail industry(Ho, R. et al. 2009). This new entrant is eating in the pockets of the two incumbent firms posing a need to change their operationalization.

The main strategy used by Coles Supermarket is a price reduction. This strategy has worked and helped the company to provide mutual purchasing advantage to its customers which in turn helps it to compete effectively with the new entrants (Dos Santos, Svensson and Padin 2013). This strategy can be improved by lowering prices of all their offerings on goods with varied consumer preferences and the new entrant will be disadvantaged in having few people notice their existence.

The company should also embrace a non-pricing strategy of grabbing new attention from the consumers such as differentiating consumer service. The online retailing strategy should also be embraced and this will increase cost advantage to the company over major competitors(Ho, et al. 2009).In addition , the use of online retailing will increase gains and benefits enjoyed by retail companies such as increased access to the market and reduction of their expenditure(Price 2009).

The other strategy that can work for Coles Company is improving products and service strategy depending on changes with consumer demands and collaborating with the suppliers for better products distribution.Supplier relationship maintenance strategy can work to help the retailer to gain more advantage from suppliers over the competitor and new entrants though it should be done carefully so as not to disclose confidential information to suppliers(Dos Santos, Svensson and Padin, 2013).

The future of any retail company will depend on how it will embrace the new technology. This effort will help in expanding its markets, understand consumer preferences as well as create brand loyalty.

Conclusion

The retail industry is one of the most established industries in Australia with two dominant supermarkets Coles and Woolworths Supermarket. The two companies have competed against each other over many decades without facing a major competition from any other company apart from each other. The two industries are very competitive and are currently facing a big challenge which they did not face before from a low-cost German Aldi. One of the biggest challenges from the Aldi to Coles and other players is the lowest price tags surveyed by Australian consumer advocate Choice Magazine in 2009 and found that a basket of groceries from Aldi was sold 25 percent cheaper than the nearest competitor.They seem to live to their mission ‘Clear’. They want all people living wherever they live should be able to buy groceries of every day at the lowest price and of the highest quality. Retail industry faces a number of challenges including insufficient data to enable knowing of the customer, understanding how to make purchases, improving customer experience as many companies still depend on in-person transactions and have not embraced the web as quickly as advisable. Modern retail companies must be aware of the potential underpinned by digital and web and quickly adjust to their utilization to increase their customer base. The fashion retail industry has a bright future  because the demand of its products is expected to keep rising.If the retail industry embraces new technologies there will be good customer experience in future and this is going to attract more customers.

Strategies for future growth in the retail industry

References

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