How Woolworths’ latest campaign has fared will be better understood when it releases its third-quarter sales on Thursday. At this stage its sales growth is expected to be a little better at about 2.8 per cent, than the 2.4 per cent comparative quarter sales that Coles delivered.
But does this drip feed of marketing treats lead to sustained changes in market share?
Supermarkets have long had troubles in retaining loyalty – many customers will shop with three different brands even within a week.
The war to win the hearts of children is only as successful as the ability of supermarkets to retain the shoppers whose children have been bribed.
Evidence of this is not compelling.
Coles’ Little Shop campaign last year resulted in it reporting an aberrant first quarter of 5.1 per cent sales growth in food and took sales away from rival Woolworths which reported a disappointing sales gain of 1.8 per cent. But in the following quarter a promotionally normalised result saw the fortunes reversed. Woolworths resumed its quarterly sales dominance over Coles which lifted food sales by 1.3 per cent.
The medium to longer term usefulness of these campaigns must be questioned given the sales spurt they generate generally doesn’t translate to anything like the same growth in earnings.
Unless these kinds of promotions can grow market share they only deliver lumpy and unreliable sales numbers.
Having said that the third quarter sales print for Coles was better than analysts had expected. If you back out the period last year in which the Little Shop campaign was running, it was the best quarter for Coles since June 2016.
Fresh Stikeez wasn’t the sales hit that its predecessor Little Shop had been, but it definitely helped sales revenue as did the hike in fruit, vegetable, meat and poultry prices brought on by droughts and floods-ravaged supply.
Coles is now less than one week into its latest campaign which rewards higher-spending shoppers with reusable tupperware containers – in an attempt to appeal to the environmentally conscious customer who is concerned with waste.
However, history has shown that the supermarket brand with the lowest prices – or perceived best value – will command a higher market share over extended periods.
Having everyday lower prices is more reliable to shoppers than spot specials that change from week to week.
Loyalty schemes are also heavily pushed by supermarkets to retain customers. However, the similarity between Coles and Woolworths schemes wouldn’t move the dial for either.
The general trend away from heavy discounting is becoming evident with inflation in this quarter running at 0.9 per cent for Coles and once tobacco and fresh food is removed, deflation was less than 1 per cent.
Based on Coles’ latest quarterly and the expectations for Woolworths, the gap between the two dominant supermarket chains appears to the tightening.
And the market on Monday seemed to appreciate the Coles sales result. Coles traded higher by about half of a per cent to $12.66 against the broader market decline, while Woolworths was down almost 1 per cent to $31.71.
One wonders whether the race between the two is now being determined by their respective marketing departments and which of them can dream up the most appealing give-away gimmick.
Elizabeth Knight comments on companies, markets and the economy.