Coles and Woolworths held the door open for Aldi
Inside Retail quoted Gary Mortimer, professor in Marketing and International Business from QIT, deliberating the future of Coles once it leaves the Wesfarmers stable: “the supermarket sector has changed dramatically in the past decade in relation to intense competition, with the growth of discounters like Aldi and the emergence of price-conscious shoppers who shop across multiple brands of supermarket each week.” We see it somewhat differently. The sector didn’t change by itself. On the contrary, it has been primed for change by Coles and Woolworths, who failed to develop discount brands (such as Bi-Lo or Jack-the-Slasher/Food For Less) and at the same time created expensive head office bureaucracies and infrastructure. This, in turn, led to the rush towards private labels, to improve poor margins. This allowed Aldi to enter the Australian market not as a competitor, but as a chain that simply stepped into the void. As an operationally excellent, low-cost business Aldi doesn't have to do any discounting. It just sells good quality products for less and is still more profitable than Coles and Woolworths. If the duopoly still wants to ‘compete’, our advice would be to drift away from the discount part of the market - it has been taken.