Coles and Woolworths have long since dominated the supermarket retail industry, generally being the first-stop shop for Australian's buying their weekly groceries. The duopoly is about to be challenged however by foreign entities who want to muscle in on the retail market.
Only five years ago the two retailers added up to about 80% of grocery sales. That number has dropped in recent times to around 70%, which equates to tens of millions of dollars.
The demise of Coles and Woolworths has long been documented, and can be attributed to the consumers loss of confidence when it comes to retail discounting. Your average Australian buyer doesn't want a special or a discount, they want permanent, lower prices. Turnovers and profits of the two supermarket chains have suffered, as consumers turn their loyalty towards smaller, more "hands on" grocers like IGA etc.
With confidence and loyalty failing, it appears a European supermarket giant is ready to move in and snatch some of the market share.
Barry Urquhart from Marketing Focus is convinced the sight of an Aldi store in Western Australia will become commonplace quicker than what you think.
He says that with 40 already being constructed and 30 more earmarked for locations around the state, it's only a matter of time before we see one around Esperance town! And it can only mean cheaper prices...
Barry Urquhart: "As soon as Aldi comes to (a Western Australian) town the average price goes down 8% by the other major supermarkets"
And once shoppers start going to Aldi they will be unlikely to go anywhere else... Barry again,
"the interesting buying pattern, particularly in regional and rural Australia, therefore in the south-east of the state, in centres like Esperance, you'll start to see consumers go to Aldi first, and then go on and top up at Coles and Woolworths, there's a very important ingredient in that sort of phenomena because Australian consumers are spending 34 cents in the dollar."
Being the first preference for a supermarket is incredibly important, and could lead to further hurt for the Aussie chains. Barry explains,
"now if you were exposed to deals within Aldi the temptation is to buy your discretionary, impulsive, spontaneous purchases at Aldi rather than Coles and Woolworths. So it's a double slammer, in negative terms for Woolworths and Coles, because Aldi is now the first point of call rather than the second, top-up call"
With 70 stores in WA, whether it is in Esperance or Kalgoorlie or Albany, you're sure to see one soon!
For the full conversation Sean had with Barry Urquhart from Marketing Focus, please attend the following link to the Breakfast Show Catch Up forum.