Supermarket price war to impact independents

Small food retailers can rise above the supermarket price war by offering good old-fashioned service instead, according to a retail expert.

Last week, supermarket giant Coles slashed its home brand milk to $1 a litre, and is expected to cut the cost of its home brand bread to as little as $1 a loaf.

The dramatic price reductions have sparked a food price war, with competitors Woolworths and Aldi expected to match any reductions in bread prices.

Consumer group Choice says cuts to key food staples are good news for consumers, but other industry experts have warned independent retailers could suffer as a result.

Brian Walker, managing director of The Retail Doctor, doesn’t believe the price war will last any longer than six to eight weeks, but says small food retailers will still need to “weather the storm”.

“[For those retailers,] it’s about creating a point of difference. Outside of Woolworths and Coles, if you don’t have a differentiated offer around service and convenience, you probably don’t have a very competitive offer anyway,” Walker says.

Walker says the challenge for small food retailers is creating a “back to the future” concept whereby customers walk in, you know them by name and you can have a conversation with them, which the supermarkets “simply can’t do”.

“Small retailers can’t compete on range and they will struggle to compete on price so they have to compete on these other differentials,” he says.

According to Walker, outstanding customer service and product knowledge should be combined with convenience, such as longer opening hours.

Walker says rather than offering a huge range, small retailers should offer the right range for their area and customer base.

“If you’re located in a multicultural environment, carry local produce and local cuisine,” he says.

He says retailers should also ensure they value-add with multiple promotions, and think of other ways in which to please customers such as takeaway menu ideas.

Small retailers also have a greater opportunity to take an active role in their community by putting money into local sports teams or community courses.

Walker says small food retailers should distance themselves from the price war and focus on their customers.

“Trying to be seen to be taking on the big players is dangerous… Coles and Woolworths’ low prices may have an impact on small retailers but their guns are well and truly aimed at one another,” he says.