The team at The Hungry Beast, a program on ABC TV put together this excellent video on the market power of Coles and Woolworths. It should interest newsagents given the increased interest by these two giant retailers in newsagency-like stores within their existing supermarkets.
Nothing like letting the evidence speak for itself.
More players does not necessarily mean more competition. Look at banks. even with 4 major players, there is not much real competition. Look at stationery, Officeworks has 20%, Corporate express 15% and many other groups (Office National, Officemax, Office Choice, ASA) and players like newsagencies, supermarkets, Kmart/BigW have the rest. Does this mean there is more competition? No, it means there are more outlets and possible ways of buying the goods. THE CHOICE IS YOURS!!!. You may choose to travel further to an IGA, Franklins or ALDI, pay more (sometimes less), then have to go elsewhere to get the rest of the goods you couldn’t get at your grocery store. But, people (sweeping statement) prefer one stop shopping and don’t have time nor the inclination to go elsewhere to complete a shop. Try going to work a different way for a month and see how hard it is to break the habit of convenience/speed/directness you have been used to and then tell me you can do something about Coles and Woolies.
The Government will continue to sit on its hand as it ALWAYS has when it comes to Coles ans Woolies; The ACCC are as toothless as my 90 year old grandmother.
The evidence is there regarding their destructive behaviour, yet nothing is ever really done.
Too true Vaughan. The ACCC has even gone so far as to attempt to block the sale of Franklins to Metcash (IGA), sighting a reduction in wholesale competition! Unbelievable.
Aaron, agree to a point except, Woolworths in particular, who use there might to push suppliers on cost. You may think it’s about choice/cost benefit; it’s about the supplier selling an inferior product back to W’worths.
Same thing happened with Hardly Normal I mean Harvey Norman, they sold cheap computers but; they were filled with vintage tech.
Suppliers deny it yet every single one has a way to make their stuff cheaper just for Woolworths.
Correct, John.
Back in my previous life (farming) EVERY time a special was put on by Woolies/Coles it was the farmer or wholesaler that wore the cost of the “special”. The retailer always maintained their profit margin.
John,
Not every supplier makes inferior product to meet cost demands by Woolworths. For many manufacturers, especially those in with middle and high end products, reducing quality would destroy their brand.
Many manufacturers/suppliers run at very small profit margins when supplying to Woolworths. Some make almost nothing from the venture, instead gaining margin from smaller retailers with less bargaining power. Others simply pull out because they cant make a profit from supplying to the major chains.
Thats not to say quality reduction doesn’t happen as a result of the coleus Woolworths market dominance – it does. But for many suppliers reducing quality simply isn’t an option.
Aaron, Coles and Woolworths may often be more convenient, but they are convenient because they are everywhere. For every 4 Coles & Woolworths there is only 1 competitor supermarket. The should not have been allowed to amass such a large market share, nor should they be allowed to continue expanding without any checks and balances.
i dont understand why a supplier would make little or no money supplying coles and wollies, when they could turn over slightly lower quantities for way better margin.
take national foods who are dairy farmers brand milk. they also supply the house branded milk that is 2lts for $2 right now. 25% of their product goes into the big two chains, surely they have some power over this.
perhaps, im looking at this too simply, i imagine it is a little more complicated huh?
Peter,
Suppliers choose to continue making little to no money for a number of reasons.
In the case of National Foods it may be that they make very little on house brand milk, but to keep their more expensive profitable milk on the shelves they are required to supply the cheap alternative. If they decide not to come to the table with competitive wholesale prices they might not get any of their product on the shelves.
Other companies will use the exposure they get though the majors to increase market awareness and subsequently demand. They would then supply independent and smaller retailers at higher, more profitable, wholesale price.
“They would then supply independent and smaller retailers at higher, more profitable, wholesale price.”
What a lovely state of affairs! And what great things supermarkets are doing. Got to love the ACCC.
Very true Jarryd – how long before ACP, New Ltd etc also follow the path of National Foods etc just to get product on shelves.
Woolworths now have LOWES HARDWARE versus Coles (owns) BUNNINGS – they will own everything we need to buy soon.
Do you think this is way of the future?
And then our customers whine at the price of our milk – which we’ve managed to keep the same for the last 2 years. They think it’s ok for us to go buy the ridiculously discounted (while farmers and growers are going broke) big 2 milks and sell them in our store, with the supermarket brands on them.
Tossers.
This whole issue is due the toothless , gutless ACCC who have allowed this position of duopoly.
Think about your week last week , petrol , food , hardware , liquor , probably all purchased from a retail business owned by one of these 2 sanctioned for acquisition or ownership by the ACCC … waht does the future behold ? look at the comments of Durkin ( Coles ) SMH 12Feb , that ” suppliers and manufacturers are milking profits in Australia ” a feel good statement before Coles start raping the ;ast of profits to any supplier , as a supplier to these retailers , we have not been able to pass on cost increases for 4 years , we absorb them and this year we will start reducing our workforce as a result. Dont be fooled Customers and Consumers alike , beware of the wolves with cheap milk !
“Foodstuffs vs Progressive Enterprises in the New Zealand supermarket market (jointly they control 90% of supermarket market).
Woolworths and Coles in the Australian supermarket market (share 79% of the supermarket market)”
The ACCC has been gutless against the two biggest supermarket chains in the country. Woolworths bought out the local shopping centre at Modbury Height, SA many years ago. Kick out Coles, pushed out the fruit and veg shop, since they have hardly spent any money on the shopping centre, which has left it as an ugly place. WHY? Just so that nobody else can move into the shopping centre and actually care about it.
20 mins away in Sefton Park and Prospect I wonder why there is 2 Woolworths across the road from each other. I’m guessing this is another case of keeping other businesses out of the market in this area. Why as a country have we allowed this to happen???
Among other things,how we’ve allwed this to happen is because people were stupid enough to fall for the petrol vouchers way back when, and still do today. Same as the cheap milk wars going on now – setting up a ‘need’, then watching us little guys fall down. And get abused for charging what we have to for premium milk brands. With the likes of Dairy Farmers in bed with them, growers and small retailers are f$#%ed, which is the plan.
Its called farmers markets. Its called natural living. It’s called supporting the community. So many old grocery shops have had to close down because of supermarkets, so many businesses have been stamped out.
If you go to any weekend market, you’ll find bakers who work from home and will sell you loaves for $2, you’ll find grocers who will sell you fresh vegetables for less than the cost that Coles or Woolworths will, and it all goes towards the livelihoods of people who make this produce. Support people. Its what the world used to do before it became completely corrupt.
Can understand the frustration of small retailers.
What can the ACCC really do? It would be like slapping tariffs back on imported cars, telling coles and woolies what to charge for groceries.
Australia, with only a relatively small population was always going to develop a concentrated ownership of retail.
We are living in a vastly different globalised retail environment these days, it’s survival of the fittest.
Nothing stays the same forever, and now even the big boys are scared of the “internet threat”, to their business model.
Brian we need politicians, on all sides, to legislate acceptable market share. Coles and Woolworths share around 80% of all supermarket sales. I;d say this is double what it should be.
Brian,
As Mark said politicians are the only ones that have the power to make real change in this area. In the supermaket industry, market share is the key factor that influences competition and pricing.
Our population is not so small that retail ownership needs to be concentrated. 22.5 million people can easily support a lot more than 2 major supermarket chains.
And ‘survival of the fittest’ (i.e. a free market economy) should only be the philosophical basis of an economy’s markets to the extent that it does not have significant negative economic or social impacts.
I noted on the week end that Harvey Norman were able to offer 2x $20 itunes for $30. I know if i sell itunes i would make a “profit” of $2.40. different deals for different people. The large groups are constantly able to screw suppliers simply because of there power. Until the woolworths/wesfarmers conglomerates are made to split up we will have inequality.
on a slightly different issue why do we accept such low commissions. from suppliers. Be it phones or topups or why should we accept 6%.
And particularly when selling a phone which you pay for in advance and get 14% on. Whooooeeee. we must be nuts.
Wally soon I expect newsagents to have access to a similar offer.
Jarryd, you mentioned suppliers are forced to gain margins from smaller buying groups who dont have the same barginaing power. This reduces the competitiveness of the independent sector causing them to lose what small market share they have. Overall competition at the retailer level will continue to fall if the “buyer power” only remains in the hands of a duo-ploy.