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Grocery retailing in Australia - as seen from the UK Featured

Big changes coming to Australian grocery market

UK based IGD (igd.com) is an organisation dedicated to helping the food and consumer goods industry deliver the needs of the public. It claims to be the leading source of information and best practice on the consumer goods industry worldwide. So what does it think of the Grocery retailing scene in Australia?

  

IGD is charity governed by a board of trustees that traces its roots back to 1909 when a group of grocers came together to create the Institute of Certificated Grocers to improve and develop professional standards of training and education in grocery management. IGD senior business analyst Nick Miles surveyed the Australian scene recently and reported his conclusions on the IGD web site: http://www.igd.com/our-expertise/Retail/retail-outlook/18073/Australia-in-focus-Six-trends-for-2014/

While we locals read lots of news about the dominance of the local market by Woolworths and Coles, Miles sees Aldi, Costco and Metcash as bringing a new level of competitiveness.

“Metcash is about to start initiating its new strategy, focusing the IGA store network on taking advantage of its position as local neighbourhood supermarket and convenience stores that are privately owned,” he says. “As Costco invests a further $110m into opening new stores in Adelaide and Brisbane in 2014 and Aldi marches on with its $2bn investment of expanding operations to South and Western Australia, new retailing channels are increasingly emerging and changing shopping habits for good.”

Aldi of course is known for its almost exclusive focus on house brand products. Coles and Woolworths have both tried to counter this by expanding their own ranges of lower-priced house branded products, but Miles says this strategy will be refined in 2014, when “we are likely to see more investment into the emergence of both premium and specialist private label brands, as [Coles and Woolworths] look towards these ranges in order to differentiate their offering.”

Miles identified one significant difference between Australia and elsewhere. In other markets, he said: “new store development has switched to focus on smaller stores, but in Australia, in 2013 the focus remained on ‘big box’ retailing.” He sees several strong signs that this will change in 2014.

“IGA has recently split its food and grocery business into separate supermarket and convenience operations, citing convenience as a key area through which it believes it can drive growth. In September 2013 we saw Woolworths register the trademark 'Woolworths Local' and create imagery for a new brand 'W Local'. And 2013 also saw Woolworths open four new inner urban smaller format stores.”

His conclusion: “There is a strong growth area to be exploited in the Australian market, however the retailer that is brave enough to go after it will need to have the right format, operating model and convenience-orientated ranges for it to be a success.”

And while this might increase the level of competition between the big players, it is likely to squeeze out of the market thousands of small convenience store operators.

Another area where Miles sees Australia’s grocery retailers belatedly following global trends is online shopping. “Online grocery retailing in Australia, albeit from what is a relatively low base compared to many European markets, is forecast to continue experiencing some of the fastest growth globally in 2014,” he says.

 

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