Laurie Giuseppini, former retail executive, writes:
Having spent more than 35 years in the food industry determining pricing structures and competition strategy I am struck by the “nothingness” of the GROCERYchoice initiative launched by yesterday.
The government’s attempt to “take the pressure off the cost of living” is admirable but, based on this morning’s information, GROCERYchoice is farcical. Unlike petrol price monitoring, food price monitoring is complex and includes many variables including location, brand, size, quality and weekly specials. The grocery price watch survey does not inform the consumer of any of these variables.
At least with the proposed petrol price watch, specific locations would be monitored and publicised so that a consumer can make a decision to purchase from a specific retailer in a specific suburb.
It’s interesting that petrol watch has been met with a lukewarm response from the petroleum industry and GROCERYchoice has been welcomed by the food industry. Fuel Watch includes specific locations and items, food excludes these variables. Would petrol watch be effective if it used the grocery watch principles?
The GROCERYchoice objective of assisting consumers is flawed in its execution. Supermarkets have variable pricing based on the competition around them. Prices can vary from the same retailer in distances as little as 1km away.
Grocery watch asks you to key in your postcode and then takes you to a price check completed in a huge geographical areas eg, outer western suburbs. The methodology used is very loosely described in grocery price watch and does not name brands and confirms that quality in the items checked is variable. It is difficult to imagine the variance in pricing and quality across the hundreds of supermarkets that would be located in a geographical area.
Rather than helping the consumer this method turns shopping into a gamble. Maybe you will be lucky enough to shop in the supermarket or supermarkets where the prices were checked but if you’re not you may end up paying more. This is not dissimilar to going to a casino and picking the poker machine that will give you a win. There are more effective ways of advising consumers where to shop but this would create difficulties for retailers.
As Prof Alan Fels and Aldi have indicated a review of planning regulations will ease the barrier of entry for new retailers and create true competition. This will then help achieve the governments objective of “Taking the pressure off the cost of Living”.
Rob Lake, retail recruitment commentator, writes:
Australia is a land of oligopolies, or is it duopolies. While we have four banks, we have two airlines, Optus & Telstra, Amcor & Visy and the big subjects of the recent ACCC grocery price inquiry, Coles and Woolworths.
The main conclusion of the inquiry is that while the sector is workably competitive, it needs more competition. With the exception of the telecoms, duopolies have developed as a result of two companies outperforming others.
There was a time when mother shopped at the local grocer. There were thousands of them across the country, and while there were chains such as SE Dickens and Moran & Cato, there was huge diversity of grocery ownership.
When Coles opened Australia’s first self service supermarket in North Balwyn Victoria in the sixties, they began a trend that has resulted in the current duopoly. They offered a bigger range and their cost structure led to lower prices. Success bred expansion. Now, with Woolworths, they are painted as dominating the sector and some accuse them of bullying.
The complaints from farmers and growers about supply chain dominance were largely ignored by the inquiry. (Is the collective noun for graziers or growers a grumble?)
The chains were cleared of anti-competitive behaviour, with rising grocery prices found to be largely due to world price shifts.
Aldi and the impending arrival of Costco demonstrate that there is scope for new entrants to enchant customers. Even if Aldi offers 750 lines against 20,000 in Coles or Woolies and Costco will want you to buy two years’ supply at a time.
The government has flagged that it will introduce laws to make it harder for the giants to acquire independent competitors. This appears to be window dressing as in the last three years, Woolworths has acquired eight supermarkets and Coles none, compared with dozens of greenfield openings.
The upshot of the government inquiry will be added information on shelf tickets giving us unit pricing, which Aldi and the majors had already agreed to introduce. The mathematically challenged will be able to compare the cost per gram of the 75g toothpaste with the 125g tube.
We will also see a website where cash strapped shoppers can check for the lowest prices. The 10c saving on Weeties might just pay for the extra fuel. If the price watch demonstrates that Coles, Aldi and Woolworths are cheaper than the independents, might it not result in the little guys finding tougher times?
It was not bullying that got us here, it was competition — two businesses growing by doing it better than other grocers.
Now that competition has produced a situation where we apparently need more competition.
Rob Lake clearly doesn’t go to the supermarket. I can walk to my IGA but I drive to Coles/Woolworths and drive in another direction to Aldi. Cowbell Butter is a third the price of butter in Coles/Woolworths.
Having worked in Battlestar Galactica I can assure you that Coles has got to second position through its sheer market size rather than any efficiency in its operations.
Rob Lake’s contempt for customers (and suppliers), expressed in his “let the mathematically challenged eat cake” approach helps to explain the loathing by the common herd for the approach of the big two. By the way, Rob – it’s arithematic you’re thinking of, you linguistically challenged snob. (Well, you started the insult thing.) Mathematics applies to a much higher order of calculation than percentages and long division . And as for the gentlemanly approach to competition being your watchword for succes, I am delighted to report the uplifting strength of the independent green grocer and butcher in my local shopping centre. Quality over surly service wins every time. I suggest these sneering attacks on customers and suppliers say a lot more about the threat of price-watch strategies than the big operators might care to admit.
One paragraph from Laurie Giuseppini’s article regarding the government inquiry into adding information on shelf tickets giving us unit pricing……..enabling the mathematically challenged to compare the cost per gram of the 75g toothpaste with the 125g tube, is possibly the cleverest example of retail grocery giants manipulation of the consumer, with us ironically endorsing it as being so good for us!
The trick of these hungry margin retailers will be to increase prices on both the small & large sizes, and always show the smaller size to be so uneconomical to buy, that we will be conditioned to always buy biggest is best. Who cares if we throw half of it away, or it sits around longer, and we don’t need to purchase more for awhile. These giants immediately increase turnover, make more money doing so, resulting in the choice of several sizes being reduced to one, and eventually they will promote only the larger size of anything, and occassionally spruck it with an extra % more of the contents now made available for their same regular competitive price etc. Followed by an ever increasing own name brands appearing at the expense of brands, a ploy to make these appear cheaper, make it more difficult for government regulators to assess retail competition, and eventually eradicate well known brands.
This is another example of the tail wagging the dog, corporates running governments. This is not new news and several good books will confirm the road we are so easily going down eg:
The Manipulators/Jeffrey Robinson
The Elephant & the Flea/Charles Handy
The Corporation/Joel Bakan
The WalMart Effect/Charles Fishman
Here’s to samll business, those that survive might just prove the folly we are condoning.
Why is there only comparisons between super markets. Why not comparisons to specialists shops such as butchers, greengrocers, chicken outlets and fish markets etc. .
These small business can put a downward pressure on prices.
The extreme action taken by the major players to force these people out of business when they move into a area proves that the completion they provide is real.
Same can be said for the two top supermarkets into petrol has resulted fewer independent petrol stations.
My choice is between Coles and Woolworth’s, a couple of butchers and greengrocers. I would have to go at least 30 kilometers to find any opposition. We have even lost Cole’s Bi-Lo.
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