Deutsche survey backs Woolies’ loyalty agenda

Woolworths’ turnaround looks set to continue, with further room for growth identified by Deutsche Bank.

Deutsche says Woolworths has further room for growth.

Woolworths’ turnaround looks set to continue, with further room for growth identified in Deutsche Bank’s latest annual Battle for Baskets survey.

Coles has been the primary victim of the Woolworths resurgence but IGA and Aldi stores have lost customers too, with the relaunch of the Woolworths loyalty program spurring the latest improvement.

“Our survey suggests that consumers are willing to consider making Woolworths their primary supermarket if they see continued improvement in execution, and all of the feedback we get from our channel checks in the industry is that Woolworths’ execution is continuing to improve,” Deutsche Bank research analyst Michael Simotas told The Australian.

“There are certainly a larger number of customers this year who will consider making Woolworths their primary supermarket than what there were last year.”

This year’s report, which surveyed 2400 shoppers, found the loyalty program was the most important reason for choosing Woolworths for 10 per cent of shoppers, up from 6 per cent last year. Seventeen per cent of Coles shoppers rated the Coles loyalty program as their most important reason.

“With a significant divide remaining between the two, Woolworths still has significant potential in this area to at least catch up to Coles,” the report said.

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Mr Simotas said the other area where Woolworths could continue to gain market share was in the fresh produce and meat categories where specialists still occupy a large market share.

Coles and Woolworths would likely continue to dominate when Amazon launches in Australia because of their store networks, brand perception and access to supply, Deutsche said.

Eighty-four per cent of respondents said they did not currently shop online, but of that group, 43 per cent said they would be interested in purchasing from Amazon. But 33 per cent of shoppers who shop online said they would not purchase from Amazon because they value the brands and in-store experience offered by bricks-and-mortar supermarkets.

“If you look around the world at more developed online grocery industries, the UK is a good one to look at because it is quite developed, the incumbent grocers tend to have larger online businesses than the pure online operators do and I’d expect that to be the same in Australia,” Mr Simotas said.

“The major supermarkets’ own online businesses will also continue to grow.”

Woolworths posted a 3.6 per cent fall in full-year net profit of $1.42bn and a 3.7 per cent revenue rise to $55.47bn for the 2017 fiscal year.

Reported profit was $1.53bn, a significant improvement from a $1.23bn loss the prior year, due to billions in writedowns and impairments.