In 2012, the leadership in the Australia grocery retailing market was held by Woolworths Ltd, with a 34% value share. The diversified retailer operates in supermarket retailing, chained forecourt retailing and liquor stores. These stores offer consumers a wide range of products and brands. It has also rolled out an aggressive private label strategy, making up about 25% of its supermarket sales. In 2011, it placed considerable pressure on manufacturers of national brands, in order to bring down prices to compete with its rival Coles aggressively on price.
The category is dominated by supermarkets, which accounted for 65% of grocery retailers' sales in 2012. Supermarkets' dominance of the grocery retail channel in Australia is supported by their economies of scale. Supermarkets are able to offer low unit prices with a vast store network at convenient locations for consumers to shop close to work or home. Supermarkets have looked to offer a one-stop-shop for consumers, developing and broadening their product offerings. As an example of this, the non-grocery share of revenue from grocery retailers was 21% in 2012, up from 20% in 2010, as supermarkets extended offerings such as consumer health, pet care, home and garden, and beauty and personal care.
The aggressive pricing initiatives taken by the major supermarket retailers in the latter part of the review period are set to last over the forecast period, as weak consumer sentiment persists. Competition within grocery retailing is expected to intensify over the forecast period, with aggressive discounting continuing to be used to appeal to value-conscious consumers. The fresh produce section is likely to be the next area of focus for supermarkets, as the ambient section of the supermarket has already been made more price competitive over the review period. According to Wesfarmers Ltd, the fresh produce section of the supermarket will be redeveloped by supply chain improvements, enabling better and fresher produce to be available in-store for consumers, at lower unit prices.
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