A highly competitive industry can be seen as a structure in which similar and diverse products are provided to consumers while firms utilize a variety of strategies to entice clients and observe increases in sales and improvements in operations. As such, the Australian supermarket and grocery sector is likely the most competitive industry in the country due to its involvement with shoppers with a deep understanding of products, digital and mobile marketing, the introduction of multi-channel operations, and constant innovation. Food and other necessary commodities inherently lead to diverse and fiercely competitive suppliers and retailers, but the Western-influenced markets within Australia exhibit additional levels of marketing, shopping experience features, and policies that contribute to greater competition. The landscape of the Australian supermarket and grocery industry allows for limited entry to both smaller and larger firms which can even be in direct competition with each other. This is often due to external factors such as location, nearby populations, disposable household income, and brand loyalty. All these factors influence the levels of competition among the various firms and result in a narrow space to lead within the industry and observe successful sales and profits.
Within the modern-day, shoppers possess a deep understanding of products and their own needs which greatly influence the operations and competitiveness within the sector of supermarkets and grocers. As such, the abilities of any specific firm in persuading shoppers to purchase their goods gives them easier access to customers and can overall improve their position within an industry. Similarly, recognizing and utilizing customer behavior is essential. Many operations are dictated by pattern behavior or trends within customer shopping (Tan et al., 2021). The ability to understand and effectively react to ongoing and potential behaviors are elements that allow companies to foster an advantage. This is especially relevant within the supermarket industry which may provide customers with identical or similar products and must compete even on a base level.
If products share qualities, clients may prefer a retailer based on additional facts such as location, pricing, offers, or other components. The ability of a firm to meet the needs of the customers in a way that is more effective or pertains to their requirements may result in them leading within specific areas or in overall sales. Australian markets feature similar strategies to many firms within Western grocery sectors, such as loyalty programs and capabilities that emerge from deep data analytics. With the combinations of many firms providing similar items and highly competitive services, improved or effective loyalty programs and additional attributes create an especially aggressive market structure.
Marketing is an aspect of a firm’s operation that is inherently involved with the competition, but brand identity is a vital component within the supermarket and grocery sectors. This is primarily because it encompasses the promotion of select products as well as the brand in its entirety and its features. Australian supermarkets and grocers provide a wide variety of products that require data analytics to determine the advantage of providing certain goods over others. The introduction of new products usually requires additional advertising and a failure in sales is likely to reflect negatively on the overall operations of the company. Such losses then lead to weaker positions within the competitive landscape of supermarket marketing. Australian brands currently present highly researched and detailed marketing programs that are both diverse and directly in conflict with each other.
Marketing for many industries, but especially within the sector of food and groceries, has turned to digital and mobile marketing. This scheme is also widely spread within Australia with many operations even occurring on digital or mobile platforms. Digital and mobile marketing inherently allow for greater competition due to their flexibility, high visibility, and relatively low cost of creation. Social media have become vitally prevalent within the scope of marketing, and this is equally important within the supermarket and grocery sectors. Social media has allowed firms to reach specific demographics and wider audiences overall. Certain populations engage solely with marketing through mobile or digital platforms, and as such traditional marketing may be largely ineffective (Dearlove et al., 2021). Australian supermarket and grocery firms utilize such strategies in greater quantities in recent years which has resulted in greater engagement with customers through online platforms. Mobile and digital marketing also present novel strategies for advertising and sales entirely. These can include providing advertisements that are based on manufacturer-backed deals or guides to newly-arrived products. Applying newer strategies provide firms with a competitive edge, and Australian firms utilize them in effective ways that are broadcasted to large audiences and diverse demographics as a result of the features of social media and marketing.
Another feature of a highly competitive industry includes multichannel retailing, especially within the scope of online brand identity. Traditional grocery categorization has been on a slow decline and a transformation to online retail has become persistently popular and utilized. However, the transition has also been noted to be partially adverse to store performances in certain regions (Sarisa, 2021). The change to shared online and physical retail within Australian markets has proved to be more feasible and effective and has largely given positive results in overall operations. Remaining between traditional and online retail can cause poor communication with customers and additional labor that may negatively reflect on sales. As such, complete multichannel strategies are essential to both preserve current, successful operations as well as introduce new features that come with online retail. Particular features that would be necessary for a multichannel strategy include in-store purchases, online catalogs and purchases, and additional content such as loyalty programs, discount coupons, and more. It is also vital that services within the firm operate in a way that successfully maintains and improves on both the traditional and online retail strategies.
Innovation can be observed in various settings and markets, but with the introduction of new products and services, the supermarket and grocery sectors must exhibit frequent innovation. This is often observed in the provision of private-label products or brands that have been previously absent within stores but are sought after by customers. Digital and mobile marketing also allows for previously unseen innovations such as collaboration between supermarket brands, merchandising platforms, and producers and creators. Such motions have been noted to directly relate to shopper rate increases as well purchase trends (Xin & Li, 2018). Similarly, data analytics and advanced research reveal invisible issues and the potential for novel solutions. This can be reflected in physical changes such as basket sizes or shelf space to managerial operations such as delivery options or online shopping utilities.
The supply chain within Australian markets presents two tiers of suppliers and a direct one-tier of customers. While it has been mentioned that retailers may sell similar or even identical second-tier products, they may also compete among goods acquired directly from farms or other agribusinesses. A market research report has indicated that major external drivers for growth in the industry in recent years have been the consumer sentiment index, real household disposable income, population, and demand from other businesses such as cafes, restaurants, and delivery food services. This research indicates that lack of physical access to a grocery store or supermarket can severely impact its sales. Online shopping and delivery services can allow for a firm or even a single store to gain a competitive edge if it is influenced by such an issue. Similarly, locations in regions that have decreased disposable income among customers may witness lower sales and would require additional strategies such as changes to pricing or increased discounts, or loyalty programs to see better sales. The lack of fair pricing for bulk sales to other food businesses, cafes, and restaurants, may also cause a store to lose substantial business opportunities (Van Kampen & Kirkham, 2020). As such, these factors present that the Australian supermarket and grocery industry is highly competitive and likely more aggressive in marketing and sale strategies than other sectors.
The primary four market structures in economics include perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition can be defined as a structure in which several smaller firms sell homogeneous products, do not have an impact on the price of commodities, and can enter and exit the market freely. Such a system provides little incentive to innovate and upholds limited barriers to entering and being a competitive entity within a select sector. A monopolistic competition is an imperfectly competitive structure that involves aspects of both perfect competition and monopolies. The primary features of the structure include differentiation in products or their branding, consideration of competitive pricing, and ignoring the influence of their pricing on competitors. Within such a system, profit is lost when new entities enter the market and provide newer or better versions of existing products and inherently decreasing consumer populations for other firms. An oligopoly includes the sales of both similar and diverse products among a limited number of firms, which creates links of dependencies between companies active in the market. A monopoly features a singular firm as the primary seller of commodities and lacks any competition as such a firm would have exclusive access to resources.
With these features in mind, the Australian supermarket and grocery industry is likely a monopolistic competition. While it features both small and large firms, it can be easily observed that firms that exist on a larger scale with chain stores and extensive supply chains have greater advantages and overall sales. They often dictate price settings amongst other big corporations as well as for smaller firms. Their ability to buy products or commodities in bulk from suppliers can decrease their capital spent but also provides a better profit margin. Smaller firms within monopolistic competition cannot allow themselves the same process and therefore must resort to other tactics to improve their operations. This often includes relying on external factors such as their locations, connections with the community, provisions of local produce, or supply of alternative commodities. Though their competitive advantages are limited and result in smaller profits, the nature of monopolistic competition still allows for smaller grocery and supermarket companies to survive and function alongside large competitors. The Australian market has clear big players such as Woolworths, Coles Group, Aldi, and Metcash leading the industry and observing greater quantities of sales. However, external factors and the generally high quality of life and average household income allow customers to frequent smaller grocery companies based on external factors.
The Australian supermarket and grocery industry has observed a rapid increase in growth over the past five years, especially during the Covid-19 pandemic. Early 2022 has been noted to involve 2048 businesses and achieved an annual profit of 5.1 billion dollars, which is a 2.9 percent growth from 2017 (IBIS World, 2022). Several impacts of the industry are also essential to a full economic analysis of the supermarket and grocery sectors. Positive impacts include its reliable life cycle, low revenue volatility, and the globalization of the industry. However, it is also susceptible to creating mixed or negative influences. Within a market research report, the negative and mixed impacts have been described as minimal technological change, capital-intensive operations, high concentration of firms, and frequent industry assistance. Some negative impacts have been intensified by the restrictions and effects of the pandemic which reflects more visibly in the trends of the industry in recent years. Some key trends include the decrease in price-based competition, increased demand for groceries directly as a result of the pandemic, new entrants being deterred by industry leaders, and online services that have shown evidence of becoming more prominent.
Recently acquired evidence has suggested that price-based competition has been on a recent decline within the industry. This is likely a result of companies prioritizing profit growth as an essential element of their operations. Despite this, industry competition is expected to remain fierce while mitigating price-based tactics to less utilization. Similarly, the pandemic has resulted in higher demand for the overall operations of supermarkets and grocers with emphasis on product quantities, online shopping, and delivery options. This has not greatly impacted pricing throughout the industry with prices remaining relatively similar to those before the pandemic except for certain sanitary commodities. Shopping trends have been more greatly influenced by changes in the income of consumers with many being susceptible to losing their jobs or their previous income. This has created a change in purchase behavior among certain demographics and likely influenced the profitability of certain goods over others.
Recent years have shown that the Australian supermarket and grocery industry is influenced by frequent and substantial growth but remains highly competitive as a result. Numerous internal functions reflect this with the major influences being reactions to shopper understanding and needs, digital and mobile marketing, multi-channel retail, and technological and managerial innovation. Additionally, external factors such as population sizes, disposable income, brand loyalty, and demand from other firms such as cafes or restaurants have resulted in growth. The pandemic and subsequent restrictions emphasized the increasing demand and while price-based strategies receded with little impact on pricing, profit growth became a priority through other operations. Negative impacts have also been cited, with the increase in firm concentration and the high necessity of capital for operations being key concerns. Overall, these features of the industry allow for insight that suggests that competition is fiercely active and likely to increase in intensity in the coming years.
Dearlove, T., et al. (2021) ‘Digital Marketing of Commercial Complementary Foods in Australia: An Analysis of Brand Messaging’, International Journal of Environmental Research and Public Health, 18(15), pp. 1-12.
IBIS World (2022) Supermarkets and Grocery Stores in Australia.
Sarisa, L. (2021) Business strategies in the retail supermarkets industry: A comparative case study analysis of Costco and Aldi. Master’s Thesis. Southern Institute of Technology.
Van Kampen, T. & Kirkham, R. (2020) ‘Assessment of the Supermarkets and Grocery Stores Sector in Australia: A Case Study of Woolworths and Coles using DEA and VAIC’, Journal of New Business Ideas & Trends, 18(1), pp. 1-11.
Xin, Y., & Li, X. (2018) ‘A Study of Supermarket Industry and Integral Role of Enhanced Logistics Systems’, International Journal of Science, 5(5), pp. 285-293. Web.
Tan, P. J, et al. (2021) ‘Behavioural and psychographic characteristics of supermarket catalogue users’, Journal of Retailing and Consumer Services, 60(1).