ALDI’S AUDACIOUS MARKETING STRATEGY: IS THIS THE END OF SUPERMARKET DUOPOLY IN AUSTRALIA?

Aldi Stores, a global supermarket with over 9000 employees, has been operating in Australia since 2001 with over400 stores nationwide. This February 2016 Aldi started opening more stores in South Australia,  http://https://www.aldi.com.au/en/shopping-at-aldi/sa-now-open-wa-coming-soon/,  an expansion program that will see the company take more grocery market shares from Coles and Woolworths who have been dominating the grocery industry for years now. Since these moves for increased market presence by Aldi a lot of market analysts have been asking the question, does this signal the end of Coles-Woolies dominant duopoly in Australia? But how is Aldi going to achieve this move?

Woolworths and Coles have multi-tiered strategies while Aldi is sticking to pricing advantage using private labels which make up about 20% of supermarket brands according to market research firm IBISWorld. These private labels are also expected to grow to 35% of all food and grocery sales in Australia by 2020-21. There has been a significant change over the past few months in consumers’ attitudes to private label groceries with a greater number of consumers favouring them over big-name brands, according to Canstar Blue spokesman Simon Downes. There are now Aldi aficionados and fans known as ‘Aldiholics’ who patronise their grocery stores either as a direct result of customer appeal or as a protest vote to the treatment of farmers by the other big chains.

 

Aldi’s strategic goal of providing customers with a limited range of grocery products that are supposedly of the high quality at incredibly low prices (simply put, to offer customers a smarter way to shop) is geared more towards private labels shown at http://http://businesscasestudies.co.uk/aldi/competitive-advantage-through-efficiency/introduction.html. Unlike Coles and Woolworths who have ventured into petrol, hardware, credit cards, hotels (and pokies), Aldi is being the proverbial hedgehog fighting the multi-talented foxes-Coles and Woolworths. Hedgehogs are calm, cool, collected and confident. Foxes have attacking prowess but each time hedgehog and fox meet hedgehog always wins.

Aldi supermarket store is careful and witty in its strategy of targeting mostly low-income consumers who enter their shops by putting up different kinds of displays. And now in its bid to grab more market share from Coles and Woolworths, Aldi has started targeting middle-income Australians too. Aldi is concentrating on these classes of Australian grocery shoppers who want quality groceries at affordable prices, and it’s winning the hearts and minds of consumers across the country through its efforts to create lovemarks. “Emotions are important determinants of economic behaviour more than rationality” according to Daniel Kahneman the Nobel Laureate in Economics in 2002 (Sheenan 2011).

Aldi grocery stores have topped customer satisfaction ratings in everything from overall supermarket to prepaid mobile provider, according to a market research company Canstar Blue as in http://www.canstarblue.com.au/aldi-awards/ and http://www.news.com.au/finance/business/retail/the-supermarket-switch-is-on-as-aldi-takes-top-award-in-customer-satisfaction/news-story/. Coles and Woolworths are mirror images of each other, with each company owing nearly 1000 supermarkets, nearly 700 petrol stations, more than 1000 bottle shops and hotels and more than 500 variety and hardware stores. Unlike these two big chains, Aldi is concentrating on grocery shoppers and private brands, thus winning a greater part of grocery market shares from them.

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Aldi is positioning itself in the grocery market by doing things differently from Coles and Woolworths. They have their own brand labels with limited product ranges. Their positioning strategy is a combination of cost leadership, focus strategy and differentiation. Thus Aldi wants to do things differently from Coles and Woolies as exemplified with self-service checkouts and plastic bags. The Sydney Morning Herald newspaper of 9 March 2016 wrote an article titled “Why Aldi thinks self-service checkouts are a stupid idea” shown http://www.smh.com.au/business/retail/why-aldi-thinks-selfservice-checkouts-are-a-stupid-idea-20160308-gne2np.html.

It is clear that Aldi Company is positioning itself in the market clearly to rival both Coles and Woolworths.

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With supermarkets accounting for 63% of all food sales in Australia; 80% of which is controlled by Coles and Woolworths (FOODmap, Department of Agriculture, Fisheries & Forestry), and with Aldi’s witty strategic plan it is clear that Aldi supermarket is set to take a greater chunk of this market share from the big two.
REFERENCES
1. ABCnews (2016). Masters: The rise and fall of Woolworth’s entry into home improvement. ABCnews 18 January 2016. Accessed online from http://www.abc.net.au/news/2016-01-18/timeline-the-rise-and-fall-of-masters-hardware/7095438
2. Australian Government Department of Agriculture, Fisheries and Forestry (2012). FOODmap-An analysis of the Australian food supply chain. Accessed online from http://www.agriculture.gov.au/SiteCollectionDocuments/ag-food/food/national-food-plan/submissions-received/foodmap-an-analysis-of-the-australian-food-supply-chain-30-july.pdf
3. Chung, F (2015). The Supermarket switch is on as Aldi takes top award in customer satisfaction. Business retail July 21 2015. Accessed online from http://www.news.com.au/finance/business/retail/the-supermarket-switch-is-on-as-aldi-takes-top-award-in-customer-satisfaction/news-story/3ce35413bb26d01118190010c9cb0916
4. IBISworld (Feb 2016). Supermarkets and Grocery Stores in Australia: Market Research Report. Accessed online from http://www.ibisworld.com.au/industry/default.aspx?indid=1834
5. Pash, C (2016). Aldi opens its battle with Coles and Woolworths in South Australia. Business Insider Australia 3 February 2016. Accessed online from http://www.businessinsider.com.au/aldi-opens-its-battle-with-coles-and-woolworths-in-south-australia-2016-2

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2 thoughts on “ALDI’S AUDACIOUS MARKETING STRATEGY: IS THIS THE END OF SUPERMARKET DUOPOLY IN AUSTRALIA?

  1. They certainly seem to be doing all the right things. Their market share is growing and they are putting a lot of pressure on the big two. I read something in the last week about how woolworths are now changing their private label strategy, something to do with making the packaging more attractive. At least aldis private label products mirror actual brands which probably makes them look more appealing to the customer than just a plain package and the product name. I think tim tams weren’t too happy with aldis comparative product package as it was almost identical. Their pre-paid mobile plan used to be good when they offered unlimited calls and 5gb of data for $35 but I think too many people abused the fair use policy and so they changed it and you only get a fraction of the amount of data and calls now.

    The Australian supermarket industry is too concentrated though especially compared to other countries in the western world so its good there is more completion now even if the other players in the market are coming from overseas. We probably need IGA to step up their game more but im sure it hasn’t been easy competing against the big two.

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    • Thanks Aston for your comments which I completely agree with.
      Yes, Aldi is trying to develop a niche differentiation with their private labels, their target low- and middle-income markets and their cost leadership strategy. Certainly we need IGA to step up their game. But with the Aussie supermarket so concentrated and so competitive it makes it a lot difficulty. Again IGA being an independent grocery store need to work on their logistics and supply chain which is shooting their shelf prices up making it difficult for competition.
      Woolies and Coles have bigger financial muscles with low-cost supply logistics. But until they focus on what they actually want to be market leaders on it will be difficult to stop Aldi. Typical example being the demise of Woolies’ Masters project.

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