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Woolworths is dumping its Select and Homebrand products, but will it make it more attractive for customers. Picture: Ian Waldie/Bloomberg
WOOLWORTHS’ private label changes are a defensive response to the growing popularity of German discount retailer Aldi, but won’t have the impact the retailer hopes it will, an academic has claimed.
Australia’s largest supermarket chain is dumping Homebrand and Select labels and replacing them with Essentials and a new brand called ‘Woolworths’.
The Woolworths brand will cover more than 2,000 products, mainly food, and is expected to come with a lower price tag than the existing Select range.
University of Sydney’s business school associate professor Teresa Davis says the move is clearly in response to the growing `Aldi threat’.
“The latest move by Woolworths is no more than a defensive strategy against Aldi,†Prof Davis said.
“It is reactionary and is essentially just tinkering around with its offering.
“I don’t think it is going to make a huge difference.â€
She said that since arriving in Australia 15 years ago, Aldi has been quietly cementing itself as the alternative while Woolworths and Coles were locked in a long-term price war.
Aldi has injected more competition with Woolworths and Coles.Source:News Corp Australia
“Aldi has consistently said: `We don’t have too many brands, they are private labels, but this is our offering and we make sure they are of decent quality and at a good price’, while there’s nothing to differentiate Woolworths and Coles, and Woolworths doesn’t appear to have a clear long-term strategy to combat this.†She said both Coles and Woolworths confused consumers with their plethora of private labels ranging from premium, mid-tier to low-end while Aldi’s strength was its simple offering and its `less is more’ strategy.
Woolworths is struggling with declining sales growth, while Coles continues to maintain strong growth due to is ‘everyday prices campaign’, analysts say.
Woolworths is axing its Woolworths ‘Select’ products. Picture: GettySource:Getty Images
Aldi is expected to steal market share from the major players and the independents as it aggressively expands its store network.
A UBS report, released in May, said Coles was expected to lose sales to Aldi at a rate of about $332 million a year to the 2019 financial year, while Woolworths was expected to lose $476 million. It also said Aldi’s market share of about six per cent nationally would jump to 10 per cent in four years time.
Analysts estimate Woolworths’ share of the $88 billion supermarket sector to be about 40 per cent, while Coles has more than 30 per cent.