Fairfax newspapers are today reporting that Fosters intervened to stop delivery of a range of their beers to Coles and Woolworths once the heard of plans for major discounting by the supermarket giants.
I am concerned that it may only be a matter of time before the supermarkets target magazines in an effort to attract shoppers. Can you imaging how shoppers would ready to Woman’s Day and New Idea priced at, say, $2.95? I hope that magazine publishers and distributors support their independent retail channel as Fosters did it its blocking action.
While loss leader pricing has been around for decades and is an important part of any retail business strategy, the current price drop craziness is designed to take business from independent retailers and this is where Australian consumers risk suffering.
Coles and Woolworths are not committed to low prices every day unless they squeeze product manufacturers, supply chain partners, employees and others to carry the financial cost so that their profits are not affected. This is where there is a considerable community cost in their much hyped discounting campaigns. I feel for the farmers and others who are carrying the cost of the milk campaign being run by Colesd and Woolworths.
These giants are trying to fundamentally change price perception forever as they know this is a game they can win – they have retail sewn up in this country. Their negotiating power is extraordinary.
The community as well as independent retailers need more suppliers like Fosters who are prepared to step in and protect local jobs.
I had one of my subagents share with me the knock on effect of Coles and Safeway dropping Milk Prices. His overall sales have dropped by 20% as a result. Small business rely on the bread, milk and paper sales to generate traffic in the hope that the consumer may buy something else when they visit. If the discounting continues, the community in one small area will lose a milkbar that employs staffand a business owner who spends his profits within the community.
Let’s hope we all have not gone before the consumer realise the effect these big giants have on our economy.
everyone should buy a carton of fosters on the way home to show support .
i’ll drink to that
While we all focus on the low price of beer…just watch the cost of fuel rise…or increased pokie returns. It is all smoke and mirrors. They have Pubs, fuel, food and grog..while on hand gives..the other two hands take.
Baz
Sorry to bang on again about the milk war thing…
The other thing, apart from screwing dairies and small retailers, is that their premium brands are also screwed. Of course, what are we selling? Their premium brands, of course.
Trouble with the grog, like many other basic ‘staple’ products involved in the duopoly’s cancer, is that they actually own large chunks of the respective sectors to start with.
Well done Fosters! Should be more companies like yours.
i only see 90% of the groceries market will be own by these giants.
don’t blame them blame us for being stingy buying everything at supermarket and looking for cheap brands aka homebrand
What great publicity for Coles and Woolworths, being attacked for being too cheap. They must all have a laugh around the boardroom table over that. The fact is the vast majority of consumers will flock to them because of this ( beer below cost-yes please). Can you really blame them, who cares about the longterm effects when your struggling to make ends meet right here and now.
Good call Peter, who cares that you will not have a job in the fuure or that your kids will only have coles or woolies to choose from when they enter the work force.
Who cares that once they eat up the smaller retailers they will then jack up the prices as they have done with fuel, as long as you get cheap stuff now right?
Good luck with that sales pitch Luke. I can tell you hear and now nothing stops change. If you think people are going to shop with you out of loyalty and an eye to the future, think again.
As all large retailers have discovered recently people have never been more price sensitive or aware. The internet is making it even more easy to compare prices.
Small retailers are going to have to stand out to survive.
Peter, if your ONLY point of difference is price then you are the one in trouble not me, as there is always someone who can offer similar things for less.
Why not open the door fully to parallel imports so people like you can buy look alike products for half the price from Vietnam or South America where they do not have to pay those pesky high production costs? It should not matter that they taste a bit off or you do not know what it contains or that the sizes may be different after all it is all about price isn’t it, nothing to do with service, quality or range.
All I am saying Luke is you can try the Gerry Harvey defence on prices if you want to, but it won’t wash with the public. Bashing the majors over low prices simply plays into their hands as Gerry found out by bashing the internet.
The decline of the corner milk bar/bottle shop started ages ago and they make up a poofteenth of sales these days. We are collectively much better off as consumers with retailers such as coles,woolworths and Aldi.
If you dispute otherwise you are a fool.
Now we are seeing retailers such as Costco and hopefully Walmart hit our shores…… fantastic!!!
You are the fool Peter if you think the majors are cutting prices and offering loss leaders because they care about the consumer and want to do the right thing, it is all designed to drive the competition out of the market as Walmart tried in the US and as soon as it is done then bang the price goes up.
Fuel is a prime example, when coles and woolies first went into servos they offered anywhere up to 15c a ltr off but it did not last. It only lasted long enough to drive out the majority of competition and now we are paying more then ever.
But I agree with you, there will always people like you around to drink house brand beer that tastes like cats wee because they can save a few bucks and it looks like the real thing or buy imported tim tams because they are “ON SPECIAL”, but that is what the ads are for right, to keep the sheep from looking up and seeing the fences.
Do a google search on Walmart in the US and still tell me they are good for people especially their own workers.
There may be a test appearing in a major retailer’s stores shortly. Rumour has it that one major retailer is about to bring in a well known instant coffee brand from overseas and will sell it cheap.
If they have the balls to tell consumers that it is in fact a parallel import coffee then the results will show if australians really care about Australian business.
Hop in your time machine Luke and go back to the “good old days”. I’ll stay in the present and shop in modern, well stocked, low price supermarkets.
Peter,
While i agree with the idea that bashing competitors over lower pricing is generally futile and counter-productive, there is a vaild concern over market dominance and the role one’s market share plays in terms of sustained competition.
We are no always better off with larger retailers. Small and medium sized retailers can react to market changes quicker and are often more competative in other non-price areas of competative difference. Price is never the sole deciding factor for consumer. Small and medium sized retailers are often better positioned to provide greater levels of innovation. And then there is the economic consideration where small and medium retailers provide higher levels of employment in relation to turnover. Greater distribution of wealth is naturally good for the economy.
Anyone who follows the trends will know that Australians have actually trended away from large once weekly shopping trips towards both once-weekly combined with regular top-up shopping and top-up shopping only. This has led to strong growth for smaller/med supermarkets (know in the industry as top-up shops) and convenience stores. This trend demonstrates a shift in consumer decision making where convnience, not price, is a more heavily weighted factor.
I would hazard a guess that over-homogenised retail stores like Wallmart and Costco will not take off in a big way here in Australia.
Australians can be very patriotic, until it comes to product prices. Cheaper, imported brands will always win, and large supermarkets, with these products will dominate smaller retailers. YEs, the customer may complain about bad service, but in the long run, price is king.
Steven,
The industry trends do not support the argument that price is king.
Buying Australian made is another issue completely.