Supermarkets are shifting their advertising focus from discounting to promoting core brand values.
The trend, indentified by industry analysts IBISWorld, is confirmed in a study by investmnet bank UBS -- the discounting war which kept grovery prices down has eased.
Supermarkets in Ausrtralia have been enaged in price-based competition for almost a decade, with discounting the typical strategy for most supermarkets.
IBISWorld says Coles and Woolworths have shifted focus from increasing market share to boosting profit margins. This strategic change is most noticeable in advertising campaigns.
“Advertisements now entice consumers with discounts less frequently and instead focus on promoting core brand values," says IBISWorld Senior Industry Analyst Tom Youl.
Woolworths has revamped its Fresh Food People campaign, leveraging the brand’s association with quality produce.
And last month Coles announced a refreshed strategic direction with three core pillars, none of which reference winning market share or lowering prices.
Campaigns to boost loyalty from shoppers include the Coles’ Little Shop campaign.
The German discount chain ALDI has also shifted focus. ALDI’s business model formerly involved offering a limited range of branded products and a range of private-label products, and little to no marketing. This strategy allowed ALDI to pass on savings to consumers.
“Notably, ALDI has increased its advertising expenditure over the past two years, promoting product quality and range, rather than low prices. Coles and Woolworths have reported similar changes to their strategies over the past two years,” says Youl.
The big supermarkets havealso incerased digital capabilities to better understand consumer trends and meet buyer expectations.
“Woolworths has been growing its WooliesX division, which uses data to improve its digital offerings, such as mobile apps and scan-and-go shopping.," says says Youl.
In March 2019, Coles announced a partnership with Ocado, an online grocery website specialises in optimising digital shopping experiences, packing technology and home delivery.
The latest Grocery Price Monitor by UBS suggests supermarket grocery prices are steadying, rather than falling.
"We were most surprised by the size of the fall in promotional intensity across both retailers," write UBS analysts in a note to clients.
"We believe the market is becoming more rational, a positive for sector sales, margin and valuations. As a result, we expect easing deflationary trends (price discounting) over 2019 to continue."
UBS says Coles and Woolworths appear to be focussed on delivering fewer, more impactful promotions.
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