The great grocery dance
The AFR reported that Woolworths supermarkets intend to reduce their price discounting and instead focus on convenience. The overall range will increase by 30%, but this won’t be visible in the stores. Instead, the stores will now have locally-tuned ranges. Woolworths also stated they will work on ‘reducing friction at transaction points’, by e.g. introducing voice ordering. In our assessment, Woolworths had no choice but to stop discounting, because their cost base is too high and the business cannot sustain low prices. The range increase may boost sales, but it will definitely also increase logistics costs. In terms of the ‘friction reducing’ initiatives, we would suggest replacing them with continuing study of Aldi and adoption of at least some parts of Aldi’s culture and operating principles. The future in the supermarkets space belongs to retailers who have low operating costs, so they can withstand occasional headwinds and react with agility to ongoing changes in the marketplace.