Supermarket pain update
Inside Retail reported that Aldi and Costco are driving down fruit and veg prices in Western Australia at a faster rate than anywhere else in the country. According to research by Bankwest, Perth shoppers spent about 7% less on fruit and vegetables than the previous year. Inside Retail commented that this signals a step up in competitive intensity among Australia’s major supermarkets. We see it a bit differently: the game is one-sided, because for Aldi and Costco this is business as usual – their cost base is low. They don’t compete – they just run their businesses. It is the incumbents who feel competitively challenged, but mainly because of their inflated operating costs. The arrival of operationally excellent competitors just exposed their inefficiencies, many of them deeply ingrained, and likely unfixable.