Reasons Behind Coles Supermarket's Depleting Market Share in Australia

This report examines the reasons behind the declining market share of Coles Supermarket in Australia. It begins with an industry overview, highlighting the competitive landscape dominated by players like Woolworths, Coles, ALDI, and Metcash. The research problem focuses on identifying factors contributing to Coles' loss of market share, including competition from Woolworths in fresh foods, disruptive entries like Amazon and Kaufland, lack of investment in store refurbishment, and higher product prices. The research questions explore the impact of disruptive technology, consumer buying behavior, and strategies to counter competition. The report employs a quantitative research methodology, collecting primary data through questionnaires from a sample of 50 consumers, using random and snowball sampling techniques. The findings reveal insights into customer demographics, family income, and store ambiance preferences. The report discusses the gender and age of respondents, family income, and occupation of the respondents and also touches upon the ambience of the store. The study concludes with recommendations for Coles to regain its market position in Australia, considering the competitive pressures and evolving consumer preferences. The report also includes a literature review, research design, ethical considerations, and a discussion of the results.

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
CUSTOMER PREFERENCES
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STUDENT ID
TUTOR’S NAME
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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
Woolworth
s
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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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
maintaining margins. Even IGA is weakening in the Australian market due to these reasons.
To add to this, other food retailers like David Jones’ are planning to open stand-alone up-
market food stores which would eventually add to the losing market share of Coles
Supermarket. While, David Jones’ targets high income and niche customers, they pose a big
threat to supermarkets like Woolworths and Coles (Clemons, 2019).
Another article on private labels in Australia says that there is a huge rise in unbranded
products sales in Australian supermarket industry. Private labels were considered as products
that are for low income customer but these days, the private label products are considered to
be of equal quality, and low-price alternatives. The private labels are more prevalent in
Australian markets as compared to US market; however, the supermarkets do not invest in
manufacturing the private labels, rather they just label them under their own brand.
Australian private labels market makes up almost 23% (as on 2011) in the FMCG market of
Australia (Keith, 2012).
Most of the literature surveys indicate that the reason for depleting Coles Supermarket’s
share and margins is the growing competition from players like ALDI, Costco and Kaufland
along with changes in regulations. The spending pattern of the customers is also one of the
reasons for depleting market share for Coles. The giants like Woolworths and Coles have a
dilemma that they should cut prices or lose sales to aggressive companies like Amazon (Wei,
Wuxiang, & Guiping, 2013).
6. Research design
Research design:
Research design can be divided in two parts which are exploratory research design and
conclusive research design. Exploratory research design aims to generate insights about the
scenario and it does not aim to provide conclusive answers. It is descriptive in nature.
Exploratory research design has been adopted as a part of this research, where several issues
for depleting market share of Coles supermarket have been discussed and addressed along
with recommendations for improvement.
Research methodology:
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
Two types of research methodology can be used as a part of research plan. Qualitative
research methodology is descriptive in nature and assesses in depth human behavior, whereas
quantitative research methodology seeks to collect numerical data by using primary data
collection tools and techniques. This research has used quantitative research methodology to
assess the purchase intentions of consumers in Australia, with reference to Coles
supermarket.
Data collection method and tools:
The report has been prepared based on primary and secondary data. Primary data has been
collected using questionnaire whereas secondary data includes past researches, journals,
public narratives and theoretical frameworks. The research is integrated with a self-
administered questionnaire to review the purchase intentions of consumers; this technique is
robust, flexible and efficient.
Sampling size and technique:
The research has adopted
random sampling method and snowball sampling as a part of
non-probability sampling technique.
The sample size under consideration in the
research is 50. Out of the total, 30 consumers are selected randomly and 20 are selected
based on reference. These sampling techniques have been used as it is less time consuming
and cost effective. The selected sample size is 50 with comprises of 30 males and 20 females.
Research limitation:
Research is limited to 50 consumer’s opinion and reviews. The sample size may not represent
entire population’s opinion and point of view in Australia.
Ethical consideration:
Primary data will be collected by taking consent of participants. It was informed to all the
participants that their personal information would be kept confidential and would be kept
limited for use in this research only.
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
7. Results and discussion
Gender & Age of the respondents
Based on the graph, it can be said that there were 30 male participants and 20 female
participants who participated in the survey. Moreover, 22 participants belong to the age group
of 35-45 years. Most of the participants are staying with family (Knox, 2014).
Family income & occupation of the respondents
Total 50 participatns were asked to fill the survey, where 15 respondents were home makers
and 13 were students. On asking to share information regarding family income, we get to
know that more than 50% of the respodents were having family incomeless than 25000
dollars.
Ambience of the store Number of respondents
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
Strongly Agree 12
Agree 11
Neutral 16
Disagree 7
Strongly Disagree 4
Q7 Ambience of the store
Number of respondents
Digital technology affects the purchasing behavior of an individual at a supermarket
It was observed that technology can be leveraged to enhance the overall experience of an
individual. Technology such as robots guiding and helping humans to reach a product in the
store, leveraging Human Sensing and Internet of Things, may create a big impact on
customers (Gilliland, 2019). Coles does not have such technology in their stores currently.
Based on the survey, it was observed that more than 80% of the respondents agreed with the
statement. More than 20% of the people have rated the statement with 5 and considered that
technology affects the purchasing behavior of an individual at a supermarket. If Coles is
observed to install new billing machines or equipment’s which can improve the purchasing
process and give better experience, it will attract more customers and that in turns will
increase the market share.
Technology makes experience more worthy Number of respondents
Strongly Agree 10
Agree 14
Neutral 16
Disagree 5
Strongly Disagree 5
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
Q6 – Technology makes your experience more worthy
Number of respondents
The question was asked whether usage of technology (such as AR/VR, Human Sensing,
Internet of Things) and automation in billing process makes your experience more worthy,
almost 50% of the respondents agreed with the statement. However, there were few who
showed disagreement, there might be different factors which enhance their purchasing
experience. More factors are discussed in later part of the report.
Factors affect consumer purchasing behavior at super market that in turns influence
market share
Promotional offers Number of respondents
Strongly Agree 18
Agree 15
Neutral 12
Disagree 3
Strongly Disagree 2
Q7 – Promotions and offers
Number of respondents
On asking to rate the list of factors which affect the purchasing intention of individual,
respondents conveyed that promotion and offers influence their buying habit. More than 50%
considered promotion and offer as one of the most important factors. However, there were 5
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Assessing reasons behind depleting market share of Coles super market in Australia; analyzing customer preferences
respondents who did not agree with the statement. There is list of the factors which influence
the consumer preference. Moreover, it was observed location of the store affects the shopping
experience. 22 respondents have given positive reply for this particular factor. Considering
the literature review, it was studied that Woolworths is investing substantial amount in store
renovation, whereas Coles yet to invest in sore refurbishments and technology. Hence,
location and technology are important factors which may be two of the reasons for depleting
of the Coles market share.
Location of the store Number of respondents
Strongly Agree 10
Agree 12
Neutral 12
Disagree 10
Strongly Disagree 6
Q7 – Location of the stores
Number of respondents
It is essential for Coles to come up with automated billing processes and accurate after-sales
services to differentiate in the market. Considering the survey, more than 30% respondents
says that queue at billing counter and after-sales services affects the purchase intention. As a
result, Amazon fresh is planning to come up with fresh vegetables sold online with free
delivery. It possesses great threat to existing super markets such as Coles. Online purchase is
considered as cost effective and time saving way to buying groceries and other products
Sales and service Number of respondents
Strongly Agree 9
Agree 14
Neutral 18
Disagree 5
Strongly Disagree 4
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