Growing Market Pressures Majors

Growing Market Pressures Majors

Dan Wilkie, Business News, 2015

The traditionally dominant players in Australian retail are being forced to reinvent themselves from increased competition/ from each other, and a host of international raiders

The competition for the consumer dollar is heating up on two fronts, with Coles and Woolworths amplifying their long lasting battle for supermarket supremacy, while department stores Myer and David jones face pressure from the rapidly evolving fashion market.

the Coles versus Woolworths saga has been a constant in Australian retail for decades; two giant chains consistently evolving their offerings to be top of mind for grocery buyers.

outside of the direct fight, however,  retailers have also clamoured to be near Coles and Woolworths, with high volumes of food traffic the supermarkets bring considered beneficial for a whole range of retail tenants. 

colliers international director of retail investment services mark werrett said research by the commercial agency across its portfolio of managed centres showed average rents for tenants in Woolworths-anchored malls was $624 per square metre, compared with $586/sqm for Coles-anchored centres.

But the average occupancy of those centres was slightly tipped in Coles favour, with 98 per cent of shops in Coles-anchored centres leased, compared with 95 per cent in centres anchored in Woolworths-anchored centres.

“What that indicates to me is Woolworths was seen as the dominant supermarkets player, and when we were leasing shops in these centres, shops preferred to go into a Woolworths-anchored centre rather than a Coles-anchored centre or an IGA-anchored centre,” Mr Werrett said.

“That will change over a number of years; we’re actually seeing Coles’ turnover increasing over out portfolio and Coles are now putting a huge commitment across Australia to upgrades, revamps and new store openings.”

The third placed supermarket in the equation is IGA which achieved average rents of $453/sqm and average occupancy of 94 per cent.

However recent research by Roy Morgan, showed that IGA customers were the most loyal with 34 per cent of grocery buyers exclusively shopping at IGA stores. 

IGA national council retail chair Ben Ryan said the research came on the back of IGA’s national price match initiative, with the network of independent retailers matching the majors on hundreds of grocery staples.

But that dynamic is expected to change significantly next year, with german giant Aldi set to open the first tranche of a planned 70 stores in Western Australia. 

Mr Werrett said IGA would likely feel the pinch more than the majors. 

“There are a lot of IGAs that are not trading well and that are on the market for sale,” Mr Werrett told Business News.

“Where they are in direct competition, or in an area thats going to be affected by an Aldi, some of those would suffer.

Of course there are some very good professional retailers and have got the capital to reinvest and operate and they’re doing a good job.

But I don’t think it will affect Coles and Woolworths too much - they will be keen to have an Aldi close by, rather than (be) closer to their competition,” he said.