Decline of Coles’ Sales Growth due to Aldi and Woolworths

Running head: PRINCIPLES OF INTERNATIONAL BUSINESS
PRINCIPLES OF INTERNATIONAL BUSINESS
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1PRINCIPLES OF INTERNATIONAL BUSINESS
Introduction
Retailers have been encountering increased competition at home as well as from
international retailers (online) and also through physical stores introduced by foreign major
retailers. Ballantyne and Langcake (2016) have revealed that a number of pressures have been
rising in the Australian financial system which has been intensifying the level of business
competition in a highly more changeable and challenging manner. Reports of MacGill and Smith
(2017) have revealed that supermarket giant Coles' sales growth has recently been pressurized
for a third consecutive quarter due to severe internal competition within the retail market of
Australia. The paper will evaluate the way Coles’ sales growth has been severely triggered by the
Woolworths and new entrant Aldi. Additionally, it will provide recommendations and focus on
different approaches used to help Coles mitigate such competition.
Discussion
Decline of Coles’ Sales Growth due to Aldi and Woolworths
The Australian grocery market is identified as the most heavily intense sector in the
world. The two leading players, Woolworths and Coles Myer typically regulate around 76% of
the grocery market. While, on the contrary, the 'Big 3' supermarket retailers operating in the UK
constitute for less than 55% of the market and in the US less than around 25% of the market
(MacGill and Smith 2017). The Australian retailer sector is encountering into an interesting
period of time with certain retailers actively developing in order to manage challenges from new
market entrants or changing patterns of consumer preferences and interests or mostly
significantly the elevating sales growth of existing competitors in the market. Reports of Arup,

2PRINCIPLES OF INTERNATIONAL BUSINESS
Beaton-Wells and Paul-Taylor (2017) have revealed that supermarket sector's growth has slowed
as individuals tend to spend less and competition intensifies. Furthermore, authors have
mentioned supermarket Coles has been showing significant lag behind its competitive grocery
retailer, Woolworths in the vast majority of key performance metrics. According to Grimmer et
al. (2017), although Woolworths and Coles have attained significant positions across 26 sub-
categories starting from its internal store performance to its organizational culture, Coles has
been facing incompetence in sustaining its position as a leading retailer in any sub-category.
Drawing relevance to these evidences, Ballantyne and Langcake (2016) have noted that
Coles’ managers and leaders have been finding it highly challenging to cope up with internal
competition within the Australian retail sector. Due to the increasing level of rivalry within the
market, the marketing strategy of Coles has become less effective as well as its strategy has
become reactionary with substantial reliance on price-based endorsements and lack of focus on
other value measures such as quality and community services. On the other hand, authors have
noted that new entrant German retailer, Aldi in the Australian retail sector has been upholding its
pressures on Coles through its investment of over $78 million in reducing its grocery price range
and further raising its sales growth. Moreover, Hatch (2017) has claimed that the Aldi through its
innovative marketing strategies will successfully sustain a position of being Australia’s price
leader regardless of the intense competition within the sector. Woolworths has successfully
invested around $1 billion into its price and services in 18 months, while on the other hand,
Coles has strategically invested $50 million into lower prices for groceries in 2018 and has the
propensity to invest equivalent amount in 2019 (MacGill and Smith 2017). Meanwhile, Rice
(2019) has mentioned that into this intensified and competitive environment, the entry of foreign
retailer Aldi has triggered the customary sales growth of once leading supermarket Coles. Such