Supermarkets in Australia have had it good for some years, having the protection of a duopoly, which is almost a licence to print money in most circumstances. Woolworths certainly did for quite a while, and the fact that Coles did not is a reflection of poor management rather than a competitive market.
Perhaps I am being overly conspiratorial, but why you should ask, did Woolworths not at least, stick a toe into the burgeoning markets to our immediate north when they were so awash with cash a few years ago? They left it to the European retailers, so presumably they did the numbers and determined that the margins were not up to their standards, the competitive nature of those markets was beyond their ability to survive. Interestingly and perhaps tellingly, the 4 major Australian banks, now a very comfortable oligopoly have made forays into foreign markets, with a stunning 100% failure rate, and are now hunkering back down to squeeze more margin from the domestic mulch cow. Perhaps Woolies came to the same conclusion, so opted instead for a skirmish into domestic hardware.
Look how well that worked.
Business models evolve, sometimes quickly and we appear to be in a period of extreme evolution. It may not be obvious on a day to day basis, but I bet you will be able to look back in 5 years, and see that the changes will have been significant. I predict that general wholesalers will be almost a museum piece, as business is done directly, enabled by digital technology. The choke hold they have held on the supply chains for the last 75 years is about to end.
Added competition has further complicated the happy duopoly. Aldi has taken a big chunk of share, and in the process changed the dominating retail model, increasing the focus on price to the detriment of proprietary brands and margin extraction by the ‘rental’ of retail shelf space to suppliers. By another means, Cosco has also made a dent, although nowhere as marked as Aldi, and there are pointers that Aldi’s German rival Lidl, owned by Kaufland is eying an entry to the Australian market. In addition, AFN, reporting on the Woolworths AGM is highlighting the rumoured entry of Amazon Fresh into the Australian market.
Changing consumer habits. The trip into the supermarket is just one point in the process of urban dwellers feeding themselves. Not only are there many alternate sources of products they can cook themselves now available, but eating food prepared for you is increasing, from a high priced restaurant to the lunch van that turns up in the area at 12.30 every day and sells you a sandwich.
Fragmenting consumer lives. Eating together as families has been a part of the human DNA since we came out of the trees. It plays a social role as well as one that delivers safety and acts as a medium to pass on the knowledge and experience gathered that day, and from a lifetime, but that habit is fragmenting rapidly, along with all other aspects of our work and social lives.
Technology is the enabler and often cause of all that is going on above, and the one thing we know for sure about tech, is that the pace of development is always accelerating, and that if for no other reason is the reason that the FMCG landscape will be very different in 5 years. For evidence, look no further than the Amazon Go test in Seattle, just one store, accessible by Amazon staff only at this stage, but perhaps the way of the future.
My conclusion to the opening question therefore is ‘Yes’ we are coming to the end of the duopoly, and not just in FMCG.