There are two dominant actors within the retail industry in Australia – Coles, and Woolworths. Together, they seem to possess about 80% of the whole market share. Meanwhile, there are also other rivals in this industry, such as self-standing wholesalers as well as retailers. These are independent grocery associations and Aldi; nevertheless, the mentioned main players in the market still have a substantial impact on ruling the pricing game. This, in the long term, leads to the conditions in which smaller players are either being acquired or forced out of the competition.
In the short run, a consumer may gain several benefits from the situation in which there are lower prices and significant value for money. Nevertheless, the described scope for the analysis may face the effects of the duopoly, given such dominance of two prominent market actors. This can lead to some severe consequences for a consumer because the market may become incapable of providing different available choices. What is more, it should be stated that recently, industry-wide profits have fallen because players have dropped prices and accepted a lower margin to remain competitive.
Macro-environment
Economic Factors
It seems that the recent decline in the framework of the economy in Australia is negatively affecting the actors’ performances substantially. There has been a decline in the activities within the market, given the contemporary situation of the pandemic. Moreover, several economic indicators – for instance, the fluctuation in the currency exchange rate, as well as the enfeebling of the Australian dollar – have an adverse effect on the players’
international affairs. In particular, the Australian currency depreciation against the other currencies leads to the following – imports to Australia become more expensive, exports – cheaper. Hence, the prices for imported food increase, which is not beneficial for the supermarkets. Then, this situation will affect the consumers as well – they will be likely to demonstrate a decrease in their buying activity. The actors’ profit margins, in turn, will also drop.
Political Factors
The political situation within the country affects the industry to a great extent in Australia. For example, the Federal Government set off a competition policy that hinders the elimination of this competition by the primary independent actors. The market tension and dominance caused by the latter have led to small retailers intensively fighting to achieve at least a little success in the industry. Historically, in Australia, the legislation seeks to the protection of small players from anti-competitive policies by issuing the Trade Practices Act 1974. It is aimed at promoting fair competition conditions and economic freedom. Then, this Act contains several provisions preventing forced mergers that considerably disrupt the principles of efficient competition.
Technological Factors
In retail, competition between major market players never diminishes. Many supermarkets are faced with the need not only to attract customers with the help of various promotions and discounts but also to introduce new technologies. While small stores are investing their main efforts in customer service and a unique offer, large representatives of food retailers are beginning to actively turn to high-tech solutions in trade. To ensure a sustainable connection between the store and its customers, supermarket owners are introducing modern technologies, focusing on increasing customer loyalty, awareness, and comfort. At the same time, technologies can be used both in all the latter three areas and in each separately.
Cultural Factors
It should be said that when choosing a store or food products, consumers are important not only economic factors (low prices, quality of goods, quality of service) but also social ones, such as advertising, the prestige of the store, novelty, recommendations from friends. In addition, it is important that these social factors shape customer preferences. The market not only meets the needs of customers but also shapes them through advertising and product information. Competently composed and located in the right place, advertising conveys essential information about the product to consumers and allows one to quickly make a choice in favor of one or another product.
Demographic Factors
The demographic factor provides for the study of indicators such as population size, the geographical distribution of the population, migration, age composition of the people, birth and death rates, and marital status. The results of the analysis of the influence of demographic factors on the efficiency of the network retail enterprises indicate that there is a general increase in the population of Australia – +1.18% (Worldometer, 2020) – which leads to the rise in real and potential demand. Also, migration processes and population aging are threats to the development of the retail market. The most likely opportunities for increasing demand for retail goods are the outflow of the bulk of the population to large cities and urbanization.
Natural Factors
The retail market is influenced by natural factors, including two types of seasonality: the seasonality of production, the seasonality of consumption. Seasonal products are directly related to climatic and other natural elements. Typical examples of seasonality associated with production are the growing and sale of fresh berries, vegetables, and fruits. Seasonality is inherent in many types of goods and should be considered by retailers. However, the seasonality of food production is smoothed out due to the improvement and development of technologies for procurement, processing, and storage. Seasonality of consumption can be caused by the following factors: season; holidays for which it is customary to give gifts.
Micro-environment
Competitors
The Australian retail market is becoming more concentrated as a result of which the share of operators of the largest retail chains has gradually increased. At the current stage of market development, operators are moving to new organizational formats, as well as the qualitative growth of the industry – improving and increasing the range of services; services focused on consumer demand. In the assortment policy of market operators, there is a trend towards an increase in sales of goods of low and medium price segments, products of Australian production, as well as a decrease in the share of products with unstable demand in product portfolios.
It should be noted that supermarket chains are gradually increasing the sales of their own brands. As a rule, prices for goods of own production are, on average, lower than their peers. An important factor influencing the retail market is increased competition at the level of trademarks and brands (Coles Group, 2019; Woolworths Group, 2019). With the saturation of the market with high-quality goods and the growth of incomes of the population, the image value characteristics of trademarks and brands, which are becoming modern instruments of competition, acquire great importance.
Suppliers
Assessing the influence of suppliers on the microenvironment of the retail market, one can draw conclusions about significant opportunities for its development. The most effective options include the emergence of new suppliers of goods, the stability of supply, and the reduction in the number of intermediaries in the purchase of goods, which contributes to lower prices for products. In connection with the Australian currency’s depreciation, the main and most likely threat is an increase in purchase prices for food and non-food products of chain retailers.
High volume in retail gives the retailer potential power over many aspects of the purchasing relationship. This power also carries with its responsibility for its use or non-use. The problem with volumes is to establish to what extent, for what purpose, and how the power of the distribution channel should be used in relationships with suppliers (Coles Group, 2019; Woolworths Group, 2019). Managing these power relationships requires a certain amount of administrative experience, which sometimes takes time to build up.
Customers
It should be noted the predominance of opportunities over threats from consumers in the retail market. Among the possibilities, the following can be highlighted: an increase in demand for quality goods, an improvement in the quality of service, an increase in the volume of purchases per consumer, attracting new consumers through marketing activities (Coles Group, 2019; Woolworths Group, 2019). The most likely threats from consumers in the retail market are reduced demand for products, increased dependence of consumer behavior on income levels, and weakened growth in the retail market.
Marketing Intermediaries
Given the analysis above, the supermarket industry in Australia may be characterized as an extremely competitive one. This implies that its actors are to partner with other firms so that their value delivery approaches could remain significant in the long run. The prominent actors seem to adhere to this principle and have developed notable partnerships in this regard. In particular, Coles – in 2019 – entered “into partnerships with Witron and Ocado to develop world-class, automated distribution solutions” (Coles Group, 2019, p. 1).
Moreover, according to Coles Group (2019, p. 7), this chain has “many wonderful community partnerships, including those with SecondBite, where we donate unsold, edible food to Australians in need, and where our food donated since the inception of our partnership has exceeded 84 million meal equivalents.” It might be assumed that appealing to appropriate marketing intermediaries has become an integrated element of the market’s most profitable companies.
Publics
For the players of the Australian supermarket industry, the most important public is the customer one. It is essential for them to figure out, monitor, and fit the expectations and needs of this public as it is the primary source of profit. Then, there are government publics; the chains are to operate in accordance with the actual legislation so that this public would soften the regulatory environment and provide them with more business opportunities. Finally, media publics also tend to influence supermarkets; they are capable of shed light on the companies’ affairs via various media channels. This can either strengthen or weaken the firm’s image from a customer’s perspective (Coles Group, 2019; Woolworths Group, 2019). Hence, supermarket chains should conduct such a policy and activities that would align with general media trends and public opinion – for instance, within the scope of sustainability or charity.
Customer Segmentation
Geographic Segmentation
Mobile marketing can be a practical approach to determining geographic segmentation appropriately. “Near recently conducted a study using mobile location data in Australia’s two largest cities — Sydney and Melbourne — for the three largest grocery chains” (Curtis, 2016, para. 3). According to Curtis (2016, para 4), “In terms of overall population size, Sydney (4.84 million) and Melbourne (4.44 million) are fairly similar. However, footfall seen via mobile data in Sydney (73%) dwarfed that of Melbourne (27%) across supermarkets.” This reveals that in Sydney, the rate of people actively using mobile devices and, thus, more likely to be subject to mobile marketing is higher.
Demographic Segmentation
It is suggested that the fastest increasing demographic is singles and couples without children; they have the highest expendable income rates. “This group will represent approximately 55 percent of households by 2031” (Reynolds, 2016, para. 18). Plenty of these people live in city areas and aspire to achieve comfort in their daily routine. Such a trend indicates that the industry’s actors may need to concentrate their strategies and policies rather on urban areas than on the rural ones.
Psychographic Segmentation
It seems reasonable to claim that Australians do not like to consider their society in the framework of social classes and determine it as egalitarian. Nevertheless, it was found that “25% belonged to the two affluent classes, 51% belonged to the two middle classes, 24% belonged to the working class” (Kelly, 2017, para. 7). This shows that the supermarket chains should pay more attention to the economic capabilities of the middle class, taking into account the preferences of the two others.
Behavioral Segmentation
Australian consumers have a relatively dignified level of income; thus, they tend to sought benefits of qualitative character. They are able to pay reasonably higher prices for a notable product as it put either poor negative effect on health or contributes to its improvement. The chains seem to admit such a state of affairs and focus on the issues of sustainability, significant suppliers, and products’ quality to a great extent.
Reference List
Coles Group (2019) 2019 Annual report. Web.
Curtis. C. (2016) How Australian supermarkets can acquire consumers using insights from location data. Web.
Kelly. M. (2017) Australian social class system. Web.
Reynolds. E. (2016) ‘Will smallest store save Woolies? What Metro concept says about Australia’. News. Web.
Woolworths Group (2019) 2019 Annual report. Web.
Worldometer (2020) Australia Demographics. Web.