Assessing Reasons for Depleting Market Share of Coles Supermarket in Australia

Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
ASSESSING REASONS BEHIND DEPLETING MARKET SHARE OF
COLES SUPER MARKET IN AUSTRALIA; ANALYZING
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
1. Table of Contents
1. Table of Contents.............................................................................................................2
2. Introduction......................................................................................................................3
Industry Overview..........................................................................................................3
3. Research problem.............................................................................................................4
4. Research questions...........................................................................................................5
Four Primary Aspects of Organization Performance.....................................................5
5. Literature review..............................................................................................................5
6. Research design................................................................................................................7
Research design:.............................................................................................................7
Research methodology:..................................................................................................7
Data collection method and tools:..................................................................................8
Sampling size and technique:.........................................................................................8
Research limitation:.......................................................................................................8
Ethical consideration:.....................................................................................................8
7. Results and discussion......................................................................................................9
8. Conclusion and Recommendation................................................................................15
Estimated costing in terms of time and finances..........................................................17
9. References.......................................................................................................................18
10. Appendix.........................................................................................................................22
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
2. Introduction
Industry Overview
The institute of IBIS World has stated that supermarkets and grocery industry in Australia has
been fiercely competitive & highly concentrated in nature. Several big players in the industry
are coming up with new technology and business strategy to sustain in the market. As it can
be observed in figure 1, major players include Woolworths, Coles, ALDI and Metcash Ltd
and they make up for total 80% market share in Australia. The supermarket industry has been
growing immensely with the constant growth rate of 2 to 3 % in Australia (Do, 2018).
Chart 1.1 – Food and Grocery Retail Sector Market Share for financial year 2017-18
Woolwort
hs
37.2%
Coles
30.3%
Metcash
7.4%
ALDI
9.2%
Other*
15.8%
Source: IBISWorld Pty Ltd, Treasury workings
Recently, supermarket industry has experienced a disruption with market entry of multiple
players like ALDI, German based Schwarz Group, Kaufland and Amazon fresh in Australia.
The growth of ALDI supermarket has disrupted the position of two largest players in the
industry namely Woolworths and Coles (Neo, 2019). They had cut their prices in order to
sustain in the market. Small independent players such as Food works are struggling to sustain
in such competitive industry. However, Costco is not considered as a primary player in the
market but it is planning to enter in the Australian supermarket industry representing
themselves as the lowest price store. Coscto and Amazon fresh aims to target price-conscious
consumers and that in turn will make industry more price intensive. The introduction of
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
online grocery stores and private labels are influencing the shopping pattern of individuals
substantially (Sandeep, 2012).
It has been observed that major players such as ALDI, Woolworth and Coles will have its
substantial market share in industry but Amazon Fresh, German based Schwarz Group’s,
Kaufland, will further intensify competition. Hence, it poses a threat for existing players such
as Coles Supermarket (Mudditt., 2018).
3. Research problem
Coles Supermarket is the second largest supermarket chain in Australia after Woolworths.
The purpose of this research is to assess the reasons for depleting market share of Coles
Supermarket in the Australian continent (ibisworld.com, 2018). There are multiple reasons
for the loss of market share for Coles Supermarket:
The primary reason is the monopoly of Woolworths in fresh foods product
segment in Australia. They are leaders in fresh Seafood sales and the Woolworths
brand is known by the quality of sea food.
Another reason is the disruptive entry of companies like Amazon and Kaufland who
tend to offer same products are reasonable or lower prices (Tamra, 2018).
The third reason is lack of investment in store refurbishment and supply chain by
Coles. Woolworths has heavily invested in technology, faster logistics and supply
chain. They have changed the look of their stores and integrated lot of automation
initiatives
Lastly, the price of products at Coles supermarket was observed to be 10-15% higher
as compared to other stores in Australia. Low pricing and high promotional offers by
competitors are one of the reasons of depleting market share of Coles Supermarket.
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
4. Research questions
As we are assessing the reasons for depleting market share of Coles supermarket, we could
define the below research questions that could be elaborated while performing the analysis
(bankwest.com.au, 2019).
How disruptive technology can affect the purchase intentions of the customers at a
Supermarket?
Which are the factors that affect the consumer buying behavior at supermarkets
and how Coles Supermarket can improve customer experience?
How can Coles Supermarket counter the highly Competitive market, looking at
current players like Woolworths and emerging entrants like Kaufland and
Amazon?
Four Primary Aspects of Organization Performance
There are primarily four aspects in organizational performance namely strategy, execution,
structure or cultural. In our case analysis, strategy and execution are the two aspects of
organizational performance for Coles Supermarket which reflects to our research question
and subsequent research problem.
5. Literature review
Coles supermarket was found in the year 1914 by George Coles. Across these years till 2007,
Coles became a proprietary company and Wesfarmers acquired the Coles group after
demerger of Myer Ltd. Coles supermarket is the second largest by market share in Australia.
The Coles group comprises of more than 800 stores and outlets (Bogdan, 2018).
From the literature survey, we observe that there is a highly competitive market for
supermarkets in Australia. Woolworths, the largest brand, is known for its fresh foods
segment. Woolworths has also started with store refurbishments and investing in technology
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
for faster supply chains. Companies like Amazon are coming up with fresh foods with low
prices. It has been observed that number of external players like Kaufland is entering the
Australian market. ALDI has been expanding in Southern and Western Australia and it
remains to be the third largest player in Australian supermarkets (Peak, 2019). ALDI has
gone ahead with upgrade in its stores along with the launch of a large range of fresh foods in
Australia. As per the literature survey of one of the key articles, it was known that there is a
price war between Woolworths and Coles. Along with this, ALDI is expanding rapidly and
these factors are putting heavy pressure on smaller retailers. Moreover, the online market for
groceries is also growing significantly and is expected to grow at a rate of 12.4% over the
next couple of years. The entry of Amazon fresh has started a new facet of the supermarket
industry in Australia and people now prefer to buy online products more rather than visiting
the stores. Furthermore, the American retailer Costco is accelerating its growth by leveraging
online sales channels (N, 2018).
As per IBIS World, there is an increase in the expansion initiatives for private label products.
The quality of private labels has increased over the years and people from lower- and middle-
income families now prefer to go with private labels as well, to save on costs (Pulker,
Foulkes-Taylor, Scott, & Pollard, 2018). Also, it has been seen that Amazon entry in
Australian supermarket industry is giving rise to increased online sales along with pick-up
and home delivery options for time-poor consumers (Treadgold). Amazon is expected to
pitch its products at lower prices online because of its strong liquidity and less front facing
stores. Moreover, Coles has recently started with ‘dark stores’ in Melbourne which has only
staff that stocks the products for online orders (Lane, 2019).
As per rating agency Moody’s, the bigger players in Australian supermarket industry such as
Woolworths, Coles and IGA are expected to lose market share over few years, owing to the
entry of players like ALDI and Kaufland. The margins of many supermarkets are squeezing
as they are going all out to provide promotional offers to their customers, in order to counter
fierce competition in Australia. Biggies like Woolworths and Coles are facing challenges
with rising competition (Keating, 2015).
As per Moody’s rating agency, it is expected that Coles supermarkets’ margins would reduce
more over the years due to a dilemma situation between cutting prices due to competition and
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