The Future of Supermarket Retailing in Australia - Case Study Example

Australian Retail Supermarket Industry Name Institution Date Course 1. Australian retail supermarket industry Australia remains among countries with the most concentrated grocery markets in the world with the top two retailers holding about 80% of the total grocery market share as revealed by the Australian Food and Grocery Council (AFGC). This is exceptionally high when compared with 48% in the UK, 44% in France and about 24% when the market share of the two top retailers are combined is the USA (Wall, 2014). The leadership of the industry remained largely uncontested until 2007 when Coles was bought by Wesfarmers for $20 billion. The new owners intensified reshaping and rebranding with a flurry of revised consumer marketing, fierce price discounting and endorsements by celebrities. Woolworths had been around for a long time and had established a strong heritage with a relative trend setting reputation. In 2012, the industry was valued at more than A$ 80 billion, and as the industry players to find their strongest points and fight for market share, the industry is expected to continue on its forwards growth. By 2012, there were an estimated 10, 000 or more small and independent retailers in Australia, but the entrance of the German discount grocery chain ALDI in 2001, and the US membership bulk grocery chain Costco in 2009 caused significant impacts to the business in the industry. The continued expansion of the these two retail establishments will likely play a major role is the future of supermarket retailing in Australia in the next few years (Stuart Alexander, 2014). With the growth projections of 2.5% (to A$ 83 billion) in 2012, A$ 85.9 billion in 2012 and about A$ 94 billion by 2017, the industry is promising continued growth and increased competition over the coming years. Consumers now spend more that 17% of total household expenditure on food and other non-alcoholic beverages. Increased household spending has caused the Australian supermarket and grocery industry to make the greatest contribution to retail and turnover, at around 29%. Consumers continue to show prevalence to generic house brands and this continues to grow. Increased competition between private-label and branded products as well as the changing customer shopping behaviours will likely result in a difficult landscape for players in the next few years as supermarkets intensify their shelf wars. It is predicted that customers will continue to demand a wider range of goods and increase their spending on gourmet and luxury goods. The industry continues to attract more investors as it expands. There are low barriers, if any, against new entrants. This has been depicted by new entrants like ALDI which now plans to expand business into SA and WA over the next few years. Costco, another interested retail giant from US has already established presence in Melbourne and Sydney with plans to enter into Brisbane (Mortimer, 2013). 2. Distinct business models used by the enterprises Woolworths Woolworths has maintained its leadership position in the market by increasingly diversifying its operations and providing customers with a wide variety of products. It also rolled out an aggressive private label strategy aiming at achieving 25% private label of its supermarket by 2015. It has strived to increase pressure upon manufacturers of national brands to lower prices so that it competes with major rival Coles on price. Last year, Woolworths experimented new concepts in its operations so as to gain a competitive advantage and provide unique services to customers. After installing the sushi bars across selected supermarkets, Woolworths revamped the supermarket’s beauty and personal products, with metro locations providing mini makeovers as well as premium beauty and personal care brands. The retail giant also introduced store formats, experimenting with smaller format stores in inner city locations with a refined product offering that includes barista coffee and a great variety of ready-made meals (Euromonitor international, 2014). Woolworths also places high value to the customers and has introduced the Everyday Rewards Program that has become the most popular loyalty scheme in Australia (Woolworths limited, 2014). Coles With over 785 stores, Coles has strived to increase presence in Australia by diversifying operations and going into new businesses. The retailer has continued to offer customers outstanding quality, service and value. To attract more customers, Coles has fought the low prices offered by ALDI by lowering its own prices and investing in new brighter and bigger stores (Coles, 2014). Coles has managed to keep up with competition from other retailers, and Woolworth in particular by ensuring that it doesn’t remain behind. The two major competitors have managed to adopt any new strategies launched by the other and have managed to share a big percentage of the market share. ALDI Australia The entry of this retail supermarket increased the concentration of the industry. ALDI is operated as a low cost entrant that deals with a limited number of popular grocery items. This strategy has greatly contributed to its strong emergence and growth since customers have positively responded to the model. It currently holds about 7% of the market share which is an incredible achievement for a new entrant that began business just about ten years ago (IBISWorld, 2014). By targeting local customers, ensuring high quality in products and services and maintaining competitive prices, ALDI has managed to establish itself in the market and is expected to grow in the coming years (ABC Rural, 2014). 3. Analysis of IS applications at Woolworths Within the Australian retail supermarket industry, management of the supply chain is critical for the success of the retailers business. Woolworths realised the importance of efficient supply chain management and implemented several technologies within its supply chain and business environment to great success. The retailer giant has boosted capital investment into its software platforms like warehousing as well as its inventory management systems. It refined several millions of dollars worth of technology when it rolled out the $1 billion Project Mercury Overhaul. By 2008, Woolworths had supplied software built for its Australian supermarkets to divisions like Big W, New Zealand Supermarkets, BWS, Dan Murphy’s and Dick Smith Electronics. The company rolled out IT technologies upon its Australian merchandise, replenishment, point of sale and finance systems. Appreciating the importance of an efficient supply chain to the delivery of fresh foods to the millions of customers it serves every day, Woolworths implemented its b2b integration platform that ensures real-time integration with suppliers systems. This technology has been central in Woolworth’s delivery of fresh produce in the amounts required to satisfy millions of its customer. Other technologies like its online grocery business have ensured that Woolworths remains on the leading end. Through its online infrastructure, Woolworths realised a boom in its grocery shopping making the online shopping its fastest growing segment in its $ 2.45 billion profit (Powell, 2014). Woolworths, therefore, depends almost exclusively on these technologies in achievement of success and competitive advantage. Given the current benefits and reliance on the technologies, they are classified as key operational applications. Better and improved supply chain management technologies and warehouse operational applications could still be adopted in future to work in Woolworth’s advantage and are therefore strategic to its business performance (McFarlan, 1984). Given the quick adaptability of the industry and flexibility of competitors like Coles who have also reinvented their supply chain and operational technologies, Woolworth must continue to explore new opportunities in the market that will help it maintain customer loyalty through exceptional personal commitment to customer needs. As Ward & Peppard (2002) point out, future technologies must be flexible and should emphasize on deliverables. It will be critical for Woolworths to recognize interactivity within its processes and importance of its human resources. List of References Ward J & Peppard J, 2002, Strategic planning for Information Systems, 3rd ed., New York: Wiley. McFarlan FW, 1984, Information technology changes the Way You Compete, Harvard Business Review, May-June IBISWorld, 2014, Supermarkets and Grocery Stores in Australia: Market Research Report, retrieved on 2nd October 2014 from < http://www.ibisworld.com.au/industry/default.aspx?indid=1834 > Mortimer G, 2013, FactCheck: is our grocery market one of the most concentrated in the world? Retrieved on 2nd October 2014 from Euromonitor International, 2014, Country report: Grocery retailers in Australia, retrieved on 2nd October 2014 from Wall A, 2014, Supermarket wars- a tale of the Australian duopoly, Food magazine, retrieved on 2nd October 2014 from < http://www.foodmag.com.au/features/supermarket-wars-a-tale-of-the-australian-duopoly > Woolworths limited, 2014, Strategy and Objectives, retrieved on 2nd October 2014 from ABC Rural, 2014, Report predicts Aldi discount supermarket growth to challenge Coles, Woolworths and independent retailers, retrieved on 2nd October 2014 from Coles, 2014, Annual & Industry reports, retrieved on 2nd October 2014 from Powell R, 2014, Online grocery boom powering Woolworths, retrieved on 2nd October 2014 from Read More