24 April, 2009

Supermarkets: A Study

What possessed me with that title? I've no idea. I hadn't set out to study anything, I can assure you.

Lately I have begrudgingly switched supermarkets, from Woolworths to Coles. I should preface this by admitting I can't stand Coles. It stems from when I was a teenager and the local supermarket (Coles) was full of uncaring staff that would barely give you the time of day. The supermarket was also VERY old, complete with those chrome poles at each checkout with the tiny white diamond-shaped lanterns which lit up a number to show it was open. And one end of the shop was the "variety" section, ancient metal baskets filled to overflowing with unfashionable home-brand clothes that nobody wanted. It was all just a feeling of old, abandoned, grocery-relic.

But I digress. I've switched supermarkets because until the end of July their FlyBuys card earns 0.05% on purchases. Plus they have these random $1 bonus deals on some items. I earned about $15 just in the first trip.

Now I haven't really done my shopping at Coles since the new Woolworths opened. Picture it: for years, Wellingtonians were stuck with an old and shabby supermarket enjoying its smug monopoly and pricing its items accordingly. Oh, the pleasure of high prices with a scowl.

Apparently, competition has had a positive effect on the prices in there. (Who would have thought?!) Bread and milk are pretty much the same price as Woolies now. And, quite a contrast to Woolies, they actually mark down items that are near expiry. That happens so rarely in Woolies that it was a nice surprise. I ventured home after my first new experience in Coles, quite content with my purchases.

A recent news article described Coles as "rebranding" itself. In particular the author said that they're increasing their "own brand" presence drastically with a lot of new lines, and accordingly scaling down on the branded competition. Interesting, I thought, "Don't we already have an ALDI supermarket model? I don't think Coles can ever compete!" But wait, there's more.

As is known to happen, yesterday was one of the occasions where I'd run out of several random, not-often-bought items. Off I toddled to Coles. And quickly got very annoyed. Closer perusal of the shelves told an interesting story.

For those not aware, Coles have two own-brand lines. Their budget line is called Smart Buy. These are the items packed in plain white without pictures. They are almost always the cheapest brand available. For a long time these were prolific throughout the store on almost every common item.

Then they have a "premium" own-brand label called You'll Love Coles. And sorry Coles - but no I won't, and I don't. These were originally only present in a select line of items in the store and sat alongside Smart Buy for the most part. So you might have three choices, say, of coffee: Smart Buy is $3.00, "premium" You'll Love $4.50, and then your Branded for $5.00.

You'll Love is, for the most part (in my opinion) significantly lower in quality than the brands, but only slightly cheaper than the brands. Thus I consider it poor value. If I'm going to spend that much I might as well buy the brand and enjoy some quality.

Now, their own-branding expansion appears to be in full swing. But rather than just expanding the product lines available, an insidious replacement is in the works. Smart Buy items are disappearing all over the store, replaced with decorated packaging brandishing You'll Love, and costing a lot more. Time after time the product I needed lacked the Smart Buy version. At the bottom of many shelves were the remnants of the Smart Buy items, all heavily discounted to get them out of the store. I watched a lady agonise over light bulbs while I cursed a COMPLETE lack of own-branded batteries. Hey, for a bathroom scale I am NOT buying Duracell Ultra. And I would still have preferred not to shell out for Eveready, but there was no choice. (As an aside, there was also a discontinued pack of Power Pix batteries there reduced to $4.00. Score!!!)

Milk powder. Its ingredients are... milk powder. Can someone tell me how a You'll Love will be better than a Smart Buy? Why did you take the Smart Buy away? (Growls, and puts the You'll Love into the trolley.)

I actually went without several items rather than pay for the "premium" offering. I got to the checkout rather irritated. There is no saving going on by shopping at Coles to use your FlyBuys card... if you're paying more for items of dubious quality.

As I was driving home I pondered this marketing strategy. I can only conclude that up against Franklins and ALDI own-brand items, that Coles have completely given up and accepted defeat. (Some people will remember that Coles supermarkets almost went under a few years ago... and are still battling to make a profit.)

And then I realised what they're doing. They are aiming their guns squarely at wealthy customers. People who only buy either branded, or premium discounted items. And begrudgingly I had to hand it to them. These are Woolworths' traditional customers. But until now I don't think anyone had thought to offer them crap disguised as discounted luxury.

So I tip my hat.