Well intentioned, but questionable information.
Supermarket chains Coles and Woolworths were recently recipients of some free, unsolicited, public advice from an investment bank analyst.
He proposed that both should attack the smaller, but growing presence of the German-based interloper, Aldi, by attacking the network where it was weakest.
Apparently, extensive and intensive analysis had identified four strategic inadequacies in the market presence of the discount supermarket group. They were nominated to be:
• Limited product range – around 1350 SKUs (stock-keeping units)
• Dominance of house brands
• Lack of partially-cooked and prepared meals
• Poor customer service
REALITY CHECK
Interesting.
It is not difficult to identify and appreciate the strongest attributes of Aldi. They are:
• Limited product range – around 1350 SKUs (stock keeping units)
• Dominance of house brands
• Lack of partially-cooked and prepared meals
• Poor customer service
Collectively, they enable Aldi to offer the lowest competitive prices to Australian consumers. In some price-surveys the differences in individual product and basket-prices can typically be as much as 28%, and in isolated instances up to 40%.
Consequently, the advertising and marketing campaigns of Coles (Down, Down, Prices Are Down) and Woolworths (Cheap, Cheap) have been ineffective against the smaller competitor. Put simply, Aldi owns the market positioning of “cheap”.
Unquestionably, Coles has taken the lead in supermarket presence against Woolworths, because of its sustained and expensive advertising theme and campaign.
On balance, it is probably widely recognised as “the cheaper of the two more expensive big chains”.
FIGURES DO COUNT
Since its introduction to the Australian marketplace in 2001, Aldi has grown its footprint among the eastern coast of Australia to number some 350 stores (in June, 2015).
A total of 50 further outlets are planned for South Australia and approximately 70 for Western Australia.
The growth rate appears relentless, reflective of and driven by consumers' acceptance and demand.
CUSTOMER FOCUS
Those consumers who are attracted to the value-offerings of Aldi recognise and accept that the four “strengths / weaknesses” represent the constraints within which they make purchase selections and decisions.
An overwhelming majority anticipate and do visit competing, if not complementary, supermarkets to make “top-up” purchases. They are typically for branded products which are not available at Aldi.
Therein lies the marketing dilemma and challenge for Coles and Woolworths.
At present, and in most instances among a select and growing target audience of consumers, they are second-choice outlets.
That limits scope for impulse and spontaneous purchases. Those stimulants are usually triggered within the Aldi premises.
First choice should be a goal for both Coles and Woolworths, rather than the trading name of a liquor store network owned and operated by one of them.
A fundamental marketing, business and life principle is that it is better and more advantageous to be first, the most preferred and top of the shopping list.
That is best achieved, and sustained, by a strong focus on, say, 2, 3 or 4 strengths.
BATTLEFIELD LESSONS
Military strategies tend to focus on the desirability of attacking the opposition where it is weakest. Identifying, isolating and accurately analysing those weaknesses are imperative.
A wrong call can be expensive, the consequences long-lasting and, all-too-often, the outcome fatal.
Therefore, value must be correctly assigned to intelligence, differentiating it from readily available information.
In this case, what is a weakness and what is a strength?
Objectivity, detachment, considered and informed decisions are called for.
The same fundamentals apply to banks, retail pharmacies, jewellers, financial planners, mortgage brokers and accountancy practices.
BEWARE COMMODISATION
On the fields of battle, and in the prevailing marketplace, there is considerable fluidity. Forces ebb and flow. Contingency planning, delegated authority, integrated communication networks, unimpeded chains-of-command and short supply lines, competitive advantage and sustainable market dominance need to be deployed adroitly.
It is inconceivable, if not improbable, that Coles and Woolworths, responding to advice about the nominated weakness of Aldi would decide to substantially increase the presence and percentage of house-brand products.
For both chains that category has increased in recent years from around 12% to 25% of the product range and sales.
Besides, it can be reasonably argued that it is a strength of Aldi.
Similarly, narrowing or expanding the current product range of Coles and Woolworths to attack Aldi appears, on the face of it, to be meaningless. It is difficult to identify and quantify the purpose and the probable or desirable outcomes.
Increasing the offering of partially-prepared meals should be a decision determined by consumer demand.
Previous attempts to launch, promote, expand and highlight the DIFM (Do It For Me) category, have been met with tepid consumer responses.
The one non-negotiable, acceptable and laudable proposition is enhancing customer service, extending customer engagement and upgrading the total retail experience. That is demanded, expected and will address a prevailing deficiency in many sectors of retailing and businesses- with or without the presence of Aldi.
Care would have to be taken to avoid the temptation to refine the marketing positions of Coles and Woolworth to more closely align with that of Aldi.
Few win in such circumstances, and in the short-term it is the cheapest who comes out on top: Read: Aldi.
Moreover, look over the horizon in the global economy. German discount supermarket group Lidl has just announced its intention to enter the Australian marketplace.
Alas, another guerrilla in this crowded Australian retail battlefield or is it a further Barbarian at the gates?
This situation calls for more strategic thinking, marketing intelligence, leadership, discipline and differentiation... built on, say, 4 discernible strengths.
THE AUTHOR
Barry Urquhart of Marketing Focus is an internationally respected strategic planner, consumer behaviour analyst, author and high impact conference keynote speaker.