Risky business: Can Coles and Woolies rebuild their customer relationships?

The relationship between the big supermarkets and their customers may be on shaky ground. Does the duopoly need a rethink? Ashling Withers explores.

You’re either a Coles customer or a Woolies one.

With the big two dominating the retail landscape with 65 per cent of the retail market, most consumers have limited choice when it comes to buying groceries.

As consumers are feeling price-stressed and inflation hits our pockets, there are increasing questions as to whether they really have our best interests at heart.

After the goodwill that was created throughout Covid where the supermarkets and their employees were on the frontline supporting Australians, now there is a danger the relationship is being fractured.

Record profits at our expense? 

With both Woolies and Coles reporting record profits – an increase of $1 billion, with nearly 5 per cent rise on the previous year, consumers are calling into question how much the retailers are sacrificing to support them in these tough times.

Case in point, in a suburb of Sydney, a popular Woolworths store has been converted to a Metro with the locals up in arms and recruiting the local MP and the City of Sydney mayor to protest the change. Reduced lines and higher priced items are the cause of concern, with Woolies seemingly putting profit above the needs of local customers.

Does anyone trust anyone?

Trust goes both ways. Consumers are taking matters into their own hands with a huge jump in theft both from in-store and through automated checkouts.

The Australian Retailers Association (ARA) suggests 2-3 per cent of total retail sales are being lost, creating a major impact on overall profit.

In response, retailers are increasing security with in-store surveillance on shelves and at the checkout.

While there’s a clear need to protect against theft and ensure security for their employees, the lack of transparency and communication about how their data and imagery are being used escalates the mistrust and distance between us and them.

Growing competition

Aldi’s market share is growing thanks to pricing, continued strong product offerings and their distinctive positioning of ‘Good. Different’ to set it apart.

For the third year running, the brand has won Best Supermarket in the Canstar Blue customer ratings.

While still a small fish in the retail landscape with only 9.5 per cent of the market share, the brand poses a risk to the big two in today’s troubled environment.

So what can Coles and Woolies do to rebuild these relationships and keep their promises to their customers?

Beware the price wars

In response to inflation, both supermarkets have been racing to tell consumers about the great value they offer.

Coles has brought back its Big Red Hand, and Woolies is bringing price savings to the forefront throughout consumer communications.

But building relationships and trust takes more than pushing low-price products, particularly for the long-term.

Understanding what they really value

During the recession in the UK, the more premium supermarkets knew they couldn’t compete on price alone so looked to how they could deliver value in a different way.

With reduced budgets to eat out, Waitrose and M&S created dinner packs including a bottle of wine and a special meal deal. They understood consumer’s desire to treat themselves and offered a way that wouldn’t break the bank.

The big two need to start thinking about what can bring more value to the customer experience. What insights can they leverage to create innovative products and deals that will show consumers they understand what matters, and are responding to support them?

Be on their side

Increasingly savvy consumers recognise that brands are reducing weight and sizes to get around cost. Shrinkflation is a way for brands to subtly reduce their costs without increasing the hit to consumer wallets.

In France, the major chain Carrefour recently added messaging to explain to customers what had changed and why, giving consumers the transparency to make informed choices about the products they buy.

This is a challenge for brand partnerships, but a win in building trust with their consumers.

Transparency and honesty go a long way. Whether by explaining your actions or those of your partners, consumers know that challenges exist but treating them with respect and openness builds trust.

Perfect partners

Both retailers reward loyalty. You can’t get the unique rewards and gains at Aldi you do through FlyBuys or Woolies Everyday Rewards.

Great initiatives include helping customers put aside gained points for Christmas but what else could these loyalty programs offer that will ease the inflation pain?

Are there further partnerships that can be explored to build that loyalty, and reward those that stay in the fold?

Go back to the brand

Coles and Woolies have been consistently the most trusted brands in Australia.

Embedded in our landscape and our lives, their purpose and values both speak to delivering better for Australians, suppliers, customers and employees.

If we’ve learnt anything from Qantas, if we aren’t living and breathing these values, the impact on our reputation can be huge.

How well are Coles and Woolies really adhering to their values and promises?

What needs to be done, internally and externally to ensure every action and decision made continues to deliver?

Both retailers have an opportunity to truly stand up and stand out for Australians.

 

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This article first appeared in Inside Retail

Ashling Withers is a Senior Consultant – Employer Brand at  Principals.

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