Why Woolies is failing in the supermarket wars

A FAILED marketing campaign, a convoluted rewards system and the rise of low-cost player Aldi have led to shoppers turning their backs on the grocery giant.

The Woolworths Ltd. company logo is displayed on one of its supermarkets in Sydney, Australia, on Monday, Aug. 25, 2008. Woolworths Ltd., Australia's biggest retailer, increased second-half profit 23 percent after adding more profitable groceries and cutting prices to win market share from second-ranked Wesfarmers Ltd. Photographer: Jeremy Piper/Bloomberg News

A FAILED marketing campaign, a convoluted rewards system and the rise of low-cost player Aldi have led to shoppers turning their backs on grocery giant Woolworths, consumer group Choice says.

“It is all about price. That’s the overarching issue for consumers,” Choice spokesman Tom Godfrey said.

The consumer group’s latest research has Aldi at about 50 per cent cheaper than Woolworths and its main rival Coles for leading brand equivalent products.

Throw into the mix the unsuccessful “Cheap Cheap” advertising campaign, and it’s little wonder that Woolworths announced on Thursday a drop in its profits of up to 35 per cent for the first six months of 2015-16, Mr Godfrey says.

“Coles’ ‘Down Down’ marketing campaign seems to be going down a little bit better, even though the prices at Coles and Woolies are pretty similar,” he said.

Coles last week reported first quarter like-for-like sales grew 3.6 per cent, indicating Woolworths had given up more market share to its rival.

Woolworths also recently unveiled a new rewards program to win back customers, dumping its Qantas Frequent Flyers rewards for more food and liquor discounts for loyal shoppers.

But Choice predicts the benefits of the program may be lost on consumers who would rather see more immediate relief at the check-out.

“The revamp of their rewards program, which is trying to put the focus back on dollar savings instead of some obscure rewards points balance, has to be welcomed,” Mr Godfrey said.

“But the fact is with Aldi, which is much cheaper, everyone gets the discount.

“You don’t have to go through the hoops of a reward program.”

The supermarket giant faces further competition from the possible move into Australia of German discount grocer Lidl and a new price-matching strategy from IGA.

“The pressure is going to increase on Coles and Woolies to respond on price,” Mr Godfrey said.

Woolworths supermarket boss Brad Banducci said the focus had been on lowering prices, promoting those lower prices, revamping the customer loyalty program and refurbishing stores.

“It has only been recently that we have communicated ‘price drop’ and ‘low price always’ and we need to do a lot more work,” he said.