How Woolworths is fighting off rivals Coles and Aldi
Supermarket giant Woolworths has opened up new stores at a record pace during the last few years.
But the maintenance inside its locations had slowed considerably, and it was starting to show.
In an attempt to become more welcoming to shoppers, Woolies has decided to invest $65 million over the next year to upgrade its stores — everything from old rusty shelves to new and improved lighting — while also increasing staff labour and compiling customer feedback.
Leading the charge is Woolworths director of supermarkets Dave Chambers, who just took over the post earlier this year. After previously holding the position of managing director of Woolies’ Progressive Enterprises in New Zealand, it’s now Chambers’ job to make sure Woolworths stays ahead of rivals Coles and hard-charging German discount retailer Aldi.
Putting even more pressure on Chambers is Woolworths’ need for a CEO, after Grant O’Brien announced his resignation in June amid a slump in revenue. In August, the company announced a 12.5 per cent drop in profit over the previous year down to $2.146 billion.
With Aldi aggressively pushing its way into the eastern Australian market, prices have dropped at both Woolworths and Coles due to intense pressure. Aldi is estimated to have about 11 per cent of the Aussie market, and has intentions to open up 120 more Aussie locations over the long term.
Aldi presently has 396 stores in Australia, which is less than half than Woolies’ 961 but gaining ground on Coles’ 776. Employing about 9000 people, Aldi has doubled its revenue to $6 billion over the last five years.
But Woolworths is fighting back to secure its place at the top of the Aussie market. The retailer has already added 56,000 staff hours per week in its 961 supermarkets across the nation, and intends to add another 63,000 next year in an effort to improve fruit and vegetable availability as well as checkout registers.
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The move is very similar to one pulled by Coles that sparked a massive turnaround in 2008.
Meanwhile, Woolworths’ new Food Group managing director Brad Banducci has begun surveying customers about their shopping experience. Termed “voice of the customer,” its results became available each day after the daily survey to quickly resolve issues that arise.
Analysts believe Woolies’ same-store sales growth could return into the positive during 2016, but the $65 million investment in stores and $500 million investment in prices will bring down its margins to an estimated 5.5 per cent by 2020.
Uneasy lies the head that wears the crown.