Domestic

On-line retail big part of Woolworths’ future plans

Jon Condon, November 2, 2011

Dominant national supermarket retailer Woolworths has announced a series of strategic business and marketing moves including plans to capitalise on consumers’ growing demand for online shopping.

Woolworths director of multi-channel, Penny Winn, said the company would strengthen its focus on online, moving the business towards future growth in an era when the customer was in the driving seat, with more choices at their fingertips than ever before.

Speaking at an investor briefing in Sydney, chief executive Grant O’Brien outlined the opportunities presented by a multi?channel approach including online, and talked about how Woolworths could leverage its ‘bricks and mortar retail strength’ and supply chain expertise to deliver the value, convenience and shopping options that modern customers wanted.

During the briefing, Woolworths showcased its new online shopping platform which recently commenced roll-out. The site utilises a customer’s Everyday Rewards data, captured from in-store and online shopping, to create favourites lists and predicatively suggest products purchased regularly. Customers can also change their delivery times online and will be able to access ‘click then collect’ services from early next year.

“We are really seeing a revolution in retail as customers integrate mobile, social networking and other internet-enabled technologies into their bricks-and-mortar shopping experience,” Mr O’Brien said.

“It isn’t a question of online or offline, it’s about integrating the two seamlessly and we are increasingly finding that our most valuable customers are the ones who do both. For examples our supermarket customers who shop both in-store and online spend 70pc more than customers who only shop in-store.”

Across all its trading divisions (not just supermarkets) Woolworths says its online sales are growing at a rate of 63pc during the 2011 financial year.

Smartphone Apps display huge uptake

The company also flagged an update to its popular Supermarket iphone ‘App’, which has been downloaded 1.1 million times since its August launch. The new version can fully integrate into Woolworths online grocery shopping site.

In the case of BIG W, the launch of an app will allow customers to compare prices to competitors on like-for-like products, also with integration to online shopping.

Also during the investor briefing, Woolworths said it aimed to double its home-brand sales over the next five years.

Managing director of Australian supermarkets, Tjeerd Jegen, said Woolworths substantially lagged behind international retailers in terms of the proportion of own-brand sales. UK retail giant, Tesco, for example, had three times the penetration in own-brand sales.

He said there was a clear opportunity to capitalise on customers’ increasing level of trust in and appreciation for Woolworths’ own brands – ‘Select,’ ‘Homebrand’ and ‘Macro.’

“Customers have told us loud and clear they love the value and quality offered by own brands,” Mr Jegen said.

“They have given us a mandate to deliver more of this and we will achieve it by expanding our ranges, lowering prices, further improving quality and strengthening our brand presence. We have three very successful and well trusted multi-category own brands and there is a fantastic opportunity to make them better,” he said.

“Customers also tell us that, while they enjoy getting the broad choice of brands at Woolworths, they also appreciate the fact that own brands inject additional competition into the grocery sector by offering the same or better quality as national brands, but at a cheaper price.”

A key to the own-brand growth strategy is Woolworths’ customer evaluation program – an in-depth sensory assessment to ensure products hit the quality mark with customers. Woolworths’ sensory evaluation scheme was launched in May 2010. It has been pivotal to the quality assurance of about 1500 own-brand products, including red meat.

Woolworths Own Brands include:

  • Woolworths entry-level, called ‘Homebrand’ had been in place since the early 1980s, covering 850 products. Sales since 2000 have increased by 180pc.
  • The mid-range, mass-market ‘Select’ brand was introduced in 2004 and carries 1000 products.
  • ‘Macro’ is Woolworths’ health and wellbeing brand encompassing 400 organic, gluten free and ‘good for you’ lines, including beef and lamb. Sales for Macro have grown 43pc in the last year alone, with successful new product launches such as Mini Macro Meat and Macro Soups.

The company also announced plans to create more than 10,000 new retail jobs Australia-wide as part of new store expansion. During the year, Woolworths will open a record 39 new supermarkets.  A new distribution centre in Western Sydney will employ a further 350 people.
 

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