Grocery CX: Coles versus Woolworths
The world of grocery CX: Coles versus Woolworths
Once upon a time they were commoditising their own industry, now grocery giants Coles and Woolworths are moving towards more meaningful differentiation by delivering genuine experiences for Aussie customers.
But is there potential for an experience brand to rise through the grocery ranks?
From the outside, it's interesting to contrast the experience-driven elements of each brand which are forever cemented as Australian household names.
Focusing on Coles, we can see that they place a major experiential focus on families, creating ‘time well spent’ (a vital consideration in CX) for non-buyers, such as children. Coles encourage more time spent in-store, whereas Woolworths appeals to the more ‘efficient’ shopper.
Then on the flipside, you have Woolworths whose convenience style metro supermarkets often feel more like activations than actual supermarkets. Although Coles doesn't necessarily focus on efficiency, you could argue that time may be better spent if you're a young family.
The Great Price War of 2011
In 2011, Australia’s two monopolising grocery stores entered a bitter price war sparked by international discount supermarket chain Aldi. Suddenly, shelf prices plummeted at Coles and Woolworths in a desperate attempt to compete on cost. But was this the best move?
The store wars became a race to the bottom; Woolies was ‘Cheap Cheap’, Coles was ‘Down Down’. The problem was, however, that they structured themselves as a ‘services’ business yet were trying to compete as a ‘product’ business, which was never going to win against Aldi's product-centric structure.
Fast forward to circa 2016 where Woolies broke away from the supermarket price war, dropping their ‘Cheap Cheap’ campaign and moving towards structuring better in-store experiences. This resulted in an 11.1 per cent increase in earnings compared to Coles' 14.1 per cent drop in earnings.
Last year Coles began to move away from price-based marketing, combating price drops by creating in-store experiences such as the ‘Little Shop’ campaign - a craze sure to have induced stress and excitement into thousands of Aussie households. The campaign in which spending could earn miniature grocery collectable toys resulted in a 5.1 per cent increase in sales growth in Q1/18.
The point being, the price wars became a race to the bottom and inevitably both brands realised that there was nothing but mud down there. If affected trust from consumers and did more damage than good.
Lesson learned: There are a plethora of ways to differentiate yourself outside of price and unless you're structured like Aldi, price becomes very hard and unsustainable to compete on. That’s why the experience is key.
How will an “experience brand” rise through the ranks?
What both of these brands have realised is that the path to a sustainable, competitive advantage can be achieved through focusing on the elements that are going to create a great customer experience.
Those elements are and always should be; focusing on the entire customer journey (not just the product or point of transaction), augment your value beyond your core product or service, and curate a memorable experience.
The best experiences all share the notion of ‘time well spent’. What does that mean? It means that the time spent travelling to (or receiving the delivery of), selecting, paying, transporting, and using the products is considered valuable.
However, what ‘value’ means to a first generation Chinese-Malaysian living in Australia is different to a single mother with two children living in the suburbs. The best experience brands will understand the art of curating experiences that can appeal to different perceptions of ‘value’.
Although Coles and Woolworths are demonstrating that they understand what ‘time well spent’ means to their core customer base, there is still about 30 per cent of the Australian market who prefer to shop at non-supermarket brands.
Last year, Coles ranked number 18 in KPMG’s Top 50 Customer Experience Brands in Australia, with Aldi close behind at number 19, and Woolworths at number 28. In terms of CX, grocery retail was the highest ranked sector despite little differentiation noted in the experiences delivered. While these brands are certainly making headway, there is still a long way to go.
Be careful of the digital trap
Just because it's digital, doesn't mean it's better CX. Woolworths have recently introduced an online ordering system, while Coles is now available for on demand delivery via UberEats.
While this sounds fantastic on the surface, delve deeper and digitising your inventory by making it available to order online doesn't necessarily equate to instant success. There are nuances in the customer's preferred experience that need to be understood, and the role of digital needs to be just that: a role in a bigger story that is being curated by an end-to-end customer experience.
Customer experience is a platform that enables brands to achieve stronger differentiation in the marketplace - ultimately impacting the overall success and longevity of a business. Knowing this, it is obvious that the grocery retail market is ripe for tapping by becoming an experience brand. An exciting prospect for an industry we all utilise daily.