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In supermarket-land, loyalty is elusive. Rather, supermarket shoppers are a promiscuous bunch and are even less loyal because times are tough. Both supermarkets admit customers are in peak shopping-around mode as they look for the best deals.
Customers love nothing better than a price feud between supermarkets, but as Raymond contends, this hasn’t escalated into a full-scale price war.
He believes the supermarkets are still behaving “rationally”. For shoppers to feel the love, supermarkets would need to be a bit crazy.
So who is winning?
This month, Woolworths prices were 8.6 per cent higher than those at Aldi, and at Coles prices were 8.2 per cent above Aldi. Raymond said this was a little below the two-year average of 9 per cent.
Woolworths has not continued with further private-label price investment following Coles’ and Aldi’s response. To do so would erode its profit margin – an unpopular outcome for shareholders.
What this burst of discounting suggests is that there is at least some level of competition in the sector.
This certainly plays well into the optics for supermarkets that have been roundly accused by politicians of price-gouging, and there have been calls to force store divestiture.
Both supermarket groups have suffered brand damage over the past year and been blamed (not always correctly) for the cost-of-living pain many customers have experienced.
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But given the price retaliation from Coles and Aldi to Woolworths’ price grenade last month, further investment in lowering prices may strike all players as counterproductive.
“We would expect the next round of [Woolworths’] investment to be more nuanced, rather than a direct shelf -price reduction on commodity private label products, as we don’t believe Aldi will allow Woolworths or Coles to challenge their low price position,” Raymond said.
If the discounting is removed from the equation, a slightly different outcome emerges, according to the Choice Supermarket basket quarterly survey.
“Aldi had the best deal for shoppers looking to keep cosy this winter, with the full basket of 14 items without specials costing $55.35. Woolworths wasn’t too far behind at $58.92. The Coles basket without specials came in at $59.22, and the IGA basket would cost you $69.74,” says Choice chief executive Ashley de Silva.
Prices at Coles and Woolworths this month were more than 8 per cent higher than at Aldi. Credit: Getty
Without specials, Woolworths had the cheapest chicken breasts and pumpkin, while Coles had the best deal on apples. At IGA, you paid less for carrots and garlic than at the three other supermarkets, according to Choice.
“When taking into account specials, Aldi still came out on top, with its basket costing $54.44. Coles was next at $57.67, then Woolworths at $58.86, and IGA at $67.54,” says de Silva.
For the cheapest outcome, you need to shop around.
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