Is the slashing of prices a good thing? Picture: AAP Image/Joel Carrett
Is the slashing of prices a good thing? Picture: AAP Image/Joel Carrett

Your grocery bill is about to be slashed

COLES has launched a fresh sales campaign offering sweeping discounts, with retail experts predicting Australia is on the verge of another supermarket price war.

The major chain says the deals will focus on products to feed families, such as slashing the price of whole uncooked chickens by 60 cents per kilo to $3.90 per kilo, chicken thighs down $1 per kilo to $11 per kilo and lunch wraps cut by 30 cents to $2.

"We are helping to lower the cost of dinner, lunch and breakfast solutions with a focus on own-brand fresh products and branded big value packs in grocery," Coles chief marketing officer Lisa Ronson said.

"We've been reviewing the products our customers are buying every day and determining where we can really make a difference to their cost of living.

"We know customers need bakery staples like rolls, wraps, croissants and muffins day in day out for breakfast and lunch so we've lowered the price on these items knowing it can make a big difference to their family budget."

Yummo.
Yummo.


The announcement is a continuation of the major supermarkets' plans revealed earlier this year to focus more on everyday lower prices rather than drastically cut prices for short periods.

Woolworths announced a similar strategy, with both major chains wanting to gain "price trust" from their consumers by removing short-term specials.

But this extension of savings for more than 300 products is sure to ignite yet another price war as the two embark on a period of heightened competition from Aldi, Costco and the soon-to-be-launched German powerhouse Kaufland.

"It's a short-term gain for long-term pain," Queensland University of Technology retail expert Gary Mortimer said.

He warns that in a market consisting of two or three main players, price slashing or discounting ultimately leads to price wars.

"When you announce cutting prices on 300 items this week … while Coles will experience a sales lift in the next week or so, guaranteed Woolworths and everyone else will meet those prices," Dr Mortimer said.

"So shoppers then realise they can get those low prices at any retailer, then that spike in demand normalises and people go back to shopping at Coles and Woolworths and getting the low price on their chicken thigh.

"All that does is erodes the margin, so we're now selling the same volume of product but now at lower margin and that's why it's less sustainable."

Dr Mortimer doubted the strategy ahead of the inclusion of a supermarket giant backed by the fourth biggest retailer in the world.

"Why would they be taking a price message to market on low price 18 months before Kaufland launch," he said.

"You just can't go head-to-head with a global retailer on price."

The German giant is coming.
The German giant is coming.


He did say, however, that Coles' branching out into smaller format stores and investing in online sales is vital because these are areas Kaufland will ignore.

"My advice to retailers, not just Coles, is focus on a point of difference, don't focus on price because price is so easily copied," Dr Mortimer said.

Continue the conversation on Twitter @James_P_Hall or james.hall1@news.com.au



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