Finance Finance News How Woolworths is winning over consumers

How Woolworths is winning over consumers

Woolworths finally outdoes Coles in sales growth.
Woolworths outdoes Coles in sales growth. Photo: AAP
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Woolworths’ nostalgic brand image, subtle advertising messages and innovations have helped cement the supermarket giant’s industry stranglehold, according to retail experts.

The company on Friday announced solid half-year results which saw its profits surge 38 per cent to $969 million.

The jump in sales outpaced that reported by Coles earlier this week which produced sales growth of 1.9 per cent.

Michael Callaghan, an advertising and marketing expert at Deakin University, said Woolworths has almost 200 more stores than Coles – about 800 compared to 995.

This coincides with a much greater employee base (115,000 versus 100,000).

“Woolworths seems to focus more on larger, neighbourhood-based supermarket stores to capture the big, family shop, as opposed to convenience shops at small service station stores,” he said.

Food retailing expert Dr Gary Mortimer of Queensland University of Technology said more stores meant greater convenience.

“If you have more stores, there’s a higher probability of being a convenient distance away from local shoppers,” he told The New Daily.

“It also means you have a higher volume of products which allows you to reduce prices because there is a higher turnover of sales.”

Its new Sydney store in Marrickville, gave consumers an insight into the supermarkets of the future. Photo: Woolworths

Dr Mortimer said Woolworths has also invested millions of dollars in reducing prices to repair its price position and the consumer perception that it is more expensive than competitors.

It has also invested in data mining to better understand its customers’ shopping behaviour, as well as refurbishments to improve store presentation.

“Supermarkets are moving away from the clinical white floor and fluorescent lights, towards a more rustic, authentic farmer’s market feel,” he said.

“The new generation Woolworths store in Marrickville, Sydney, is an extension of this.

“It create a sense of newness and excitement in an industry where the supermarket shop has become a fairly habitual and mundane process.

“Innovative strategies, products and layout will keep customers coming back.”

He added: “I think there’s a little bit of nostalgia connected with the Woolworths brand.

“Consumers have always colloquially nicknamed it their local ‘Woolies’.”

Branding message

Analysing Woolworths’ branding, Mr Callaghan said its green symbol carried many positive connotations.

“Symbolically, their [Woolworths’] green branding has so many positive consequences – ecologically friendly connotations and of nature – whereas red signals negative consequences like danger,” he said.

“As well as being associated with red, Coles’ catch cries ‘down down’ in itself is a bit negative – poking a big red finger in people’s faces.”

Dr Mortimer said that after Woolworths’ “fatal error” a few years ago in competing with Coles’ price message head-on with “cheap cheap”, it has now returned to harnessing its traditional “fresh” message.

“Woolies’ advertising is more subtle and I think this has played in its favour. Pricing doesn’t become the focus until you enter the store,” he said.

I think consumers are tired of Coles’ ‘down down’ jingle and message – there is only so much that prices can go down.

“Supermarkets have just about the same prices these days and I suspect shoppers are fickle.”

Woolworths Group CEO Brad Banducci said the company is focused on continuing its investment in digital and data, and the shopping experience.

“At the end of FY17, we said that we were moving from turnaround to transformation,” he said in a statement.

“In the current half we have seen some early signs of this transformation with good progress on a number of strategic initiatives and pleasing sales growth from all of our businesses.”

Coles was contacted for comment and given the opportunity to respond to criticism over its ‘Down Down’ price message but did not respond to The New Daily by deadline.

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