Six things Woolworths needs to do to get back on track

The opportunity to impress is available every day, writes Phil Hine, general manager of Displays 2 Go.

I have worked in the grocery retail industry for a number of years and have seen plenty of change and plenty of things stay the same. The recent hype over Woolworths’ ongoing troubles, culminating with Grant O’Brien announcing he will stand down, has led me to a few conclusions.

Here is my take on some of the things Woolworths supermarkets need to be doing:

1. Get your pricing sorted

Research by Woolworths and other independent bodies show that the supermarket chain clearly has a problem with price perception. In other words, shoppers think Woolies is expensive, and they are right. This will be a longer-term project for management, but Woolworths must get started now on fixing their pricing so this perception can begin to fix itself over time. This issue will continue to hurt Woolworths as a legacy of previous management decisions, but can only begin to correct when the pricing issue is addressed.

2. Stop competing on house brands

Trying to compete with Aldi on their own brand products is an exercise in futility. By all means, have home and generic brand offerings in all relevant categories, but not at the expense of major brands. Learn the lessons from overseas experience in this area.

3. Accept there is a role for the discounters

Recognise and accept there is a role for the discount retailer in the Australian supermarket landscape, and act like it – just try to keep their share to 15% rather than 40%. There is no point trying to crush discount retailers out of existence, so never behave like that is the objective.

4. Accept the profit pool has shrunk

The days of fatter margins and reduced competition are over. Accept it, re-align your forecasts and objectives and don’t look back. This includes constantly looking to suppliers to prop up your profits.

It is a brave CEO who faces their shareholders and tells them the gravy days are gone and they need to re-think their expectations – that’s not how public companies work.  With a new CEO coming in it represents a good opportunity for Woolworths to do just that.

5. Don’t forget number one

When the shopper walks into one of your stores and sees the number one brand in a category removed from prime position and replaced with Woolworths’ own brand – what is that shopper supposed to think?  Who benefits from that move?  Never, ever forget who is most important in your business.

6. Kick Aldi where it hurts

Focusing on Coles and Woolworths’ comparative strengths (ergo Aldi’s comparative weaknesses) gives competitive advantage:

  • Work in partnership with your vendors to deliver more value to the consumer.  They are spending their own money on product development, advertising, innovation and general investment of their brands, so support them!
  • Woolworths and Coles should be able to deliver a far superior shopper experience, particularly at the checkout, by being better resourced.  Make this experience as positive as possible. It’s the Aldi shopper who needs to queue for longer, bag their own items and pay a credit card surcharge.
  • Research says that most Aldi shoppers are doing a top-up shop at the Woolworths or Coles anyway, so the opportunity to impress is available every day.