Melbourne Herald Sun, Friday January 21, 2011
There's an Australian species that is being constantly, relentlessly driven towards extinction, yet nobody seems to care or speak out. Even the victims themselves.
The species is the dwindling race called Australian grocery manufacturers. The people who, for two centuries, have made what we eat and what we drink and the goods we buy. And their greatest predators are our vast supermarket chains.
A recent report from IBISWorld has once again pointed to the advance of the giants Coles and Woolworths as they grind the smaller brands off their shelves.
They have now reached a point where 25 per cent of their sales are private brand. But they have a higher target. After all, in the US more than a third of the products are own label, while in Britain it has now risen to over 50 per cent.
The latest category to feel the encroachment of private brands is liquor. By now we've grown accustomed to the fact that most of our take-away booze comes from the Big Two.
What, you don't buy your beer at Woolworths or Coles? Well how about BWS or Dan Murphy's or ALH, they're all Woolies. While Liquorland, Vintage Cellars and 1st Choice are Coles. Against them is the scattering of high street wine shops and pubs. Not much of a contest, is it?
What's happening now is a private label assault inside the booze barns. Wines like Baily & Baily and Crittenden, beers like Dry Dock and Platinum Blonde; Mishka vodka and Napoleon 1875 brandy, are all Woolies.
Coles also have a string of beers and wines. IBISWorld predict that in two years the majors will own 10 per cent of the liquor they sell, in Britain it’s already 30 per cent. At a time when our winemakers are struggling to turn a profit, they will be an easy mark.
Michele Levine, Managing Director of Roy Morgan Research, believes the independent brands are running out of time: “Our data indicates the move towards stores’ own brands is a function of improved product.”
So as the plain wrap gets less plain, there is less reason to spend the extra on familiar labels. Look at the results of recent Choice taste tests. The top products in ice cream, pasta, sauce, baked beans, cheese and sliced peaches were own brands. Even Tim Tams had a fight to come out equal with Coles Surrenders.
An eleven year study by Morgans showed the shoppers who declared “I buy more store’s own products than well known brands” had risen from 25 to 38 per cent.
IBISWorld senior analyst Naren Savasailam points to just a few safe areas, so far. “Confectionery, hygiene and cosmetics - the public trust their brands more,” he said. After all who wants fake Mars Bars or Chanel?
This illustrates the importance of giving your brand a strong identity, so the others look like fakes and the customers will insist on yours.
What’s the point of keeping a diversity of brands? Well, do we need more than two species of kangaroo, or parrot? What’s the point of 100 breeds of duck?
In business, just like in nature, we should insist on variety, through a wide range of choice.
Showing posts with label Coles. Show all posts
Showing posts with label Coles. Show all posts
21 January, 2011
23 January, 2010
Is the supermarket discounting or ripping us off?
Melbourne Herald Sun, 23rd January, 2010
Friday evening. Pop down to the supermarket for a bottle of white to go with the fish. Aha, Safeway have 30% off their wines this week. Then you study the poster more closely. The offer is only if you buy a half dozen. So if I buy just one, I'll pay 43% more per bottle than if I bought a box?
This annoys me so I pop across the road to Coles. They have exactly the same offer, on the same terms. I wonder if the ACCC is aware of this price collusion. Dinner's on the stove so I grab a single bottle and resentfully pay nearly half more than the discounted price, and make a mental note to avoid supermarkets for my wine in future.
Can you see what has happened? Some bright spark in the marketing department has said, "Let's sell lots of wine this week by giving them big discounts on half-dozen boxes." But in the thinking process, completely neglected to foresee that they would annoy the hell out of every customer who did not want to buy their wine by the crate.
We're all used to the fact that the gift we bought for a Christmas present will cost half as much in the Boxing Day sale. It's a pain to see it in the store window but we accept that them's the breaks in shopping.
But at other times, discounting is a delicate process that needs to be handled with tact. There are many ways of doing it. The brown goods stores like the "no repayment, no interest for two years" angle. If you analyse the offer, two years' interest on the cost would equal about 20 per cent discount. On high profit items like furniture that ensures there will still be a good return in the end.
The crowds of buyers stampeding through the shopping centres this month shows you how many of the public hold back their purchases until the big red SALE! stickers appear. It also reveals the high mark-ups put on many goods, particularly the swanky up-market clothing. A pair of trousers may be hundreds of dollars cheaper, a suit by a thousand or more. I have to confess that any item of mine bearing labels by Zegna or Versace has been acquired thanks to massive price-slashing.
On the other side of the coin, if yours is a small business you have to be cautious about giving discounts,. Follow this example: you have an item that costs you $100, normally marked up by 30 per cent. That makes it $130. Being the January sales, you cut the price by 20 per cent, to $104.
Now, in order to make as much as the original profit, you'll have to sell seven times more items - and still only make $28.
If you're in business, you can't be lazy about thinking through the sums. You have to know precisely the value of an item you are selling and the true cost of discounts.
Now the public find maths a strain they were glad to leave behind after school, which is fortunate for many retailers who often create illusions of generosity while giving away very little.
Take the example of selling jeans. Say you find some belts that only cost two dollars each, in quantity from China. Instead of cutting the price by 10 or 20 dollars, you add a "free fashion belt". You have increased the perceived value of the purchase - but kept most of your profit margin.
Now you're using discounting to increase your sales, keeping money in your pocket, and not infuriating the customers.
ray@ebeatty.com
Friday evening. Pop down to the supermarket for a bottle of white to go with the fish. Aha, Safeway have 30% off their wines this week. Then you study the poster more closely. The offer is only if you buy a half dozen. So if I buy just one, I'll pay 43% more per bottle than if I bought a box?
This annoys me so I pop across the road to Coles. They have exactly the same offer, on the same terms. I wonder if the ACCC is aware of this price collusion. Dinner's on the stove so I grab a single bottle and resentfully pay nearly half more than the discounted price, and make a mental note to avoid supermarkets for my wine in future.
Can you see what has happened? Some bright spark in the marketing department has said, "Let's sell lots of wine this week by giving them big discounts on half-dozen boxes." But in the thinking process, completely neglected to foresee that they would annoy the hell out of every customer who did not want to buy their wine by the crate.
We're all used to the fact that the gift we bought for a Christmas present will cost half as much in the Boxing Day sale. It's a pain to see it in the store window but we accept that them's the breaks in shopping.
But at other times, discounting is a delicate process that needs to be handled with tact. There are many ways of doing it. The brown goods stores like the "no repayment, no interest for two years" angle. If you analyse the offer, two years' interest on the cost would equal about 20 per cent discount. On high profit items like furniture that ensures there will still be a good return in the end.
The crowds of buyers stampeding through the shopping centres this month shows you how many of the public hold back their purchases until the big red SALE! stickers appear. It also reveals the high mark-ups put on many goods, particularly the swanky up-market clothing. A pair of trousers may be hundreds of dollars cheaper, a suit by a thousand or more. I have to confess that any item of mine bearing labels by Zegna or Versace has been acquired thanks to massive price-slashing.
On the other side of the coin, if yours is a small business you have to be cautious about giving discounts,. Follow this example: you have an item that costs you $100, normally marked up by 30 per cent. That makes it $130. Being the January sales, you cut the price by 20 per cent, to $104.
Now, in order to make as much as the original profit, you'll have to sell seven times more items - and still only make $28.
If you're in business, you can't be lazy about thinking through the sums. You have to know precisely the value of an item you are selling and the true cost of discounts.
Now the public find maths a strain they were glad to leave behind after school, which is fortunate for many retailers who often create illusions of generosity while giving away very little.
Take the example of selling jeans. Say you find some belts that only cost two dollars each, in quantity from China. Instead of cutting the price by 10 or 20 dollars, you add a "free fashion belt". You have increased the perceived value of the purchase - but kept most of your profit margin.
Now you're using discounting to increase your sales, keeping money in your pocket, and not infuriating the customers.
ray@ebeatty.com
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