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Australian market turned on its head

In recent years we have visited Australia for various projects. It is a vast and beautiful country with unprecedented opportunities. And the latter is a godsend for a number of supermarkets. Until recently, the Australian retail market was dominated by the very well established Woolworth’s and Coles and there was no way to avoid them. Often, they were the only providers in the vast expanse of Australia and did very little innovation. The market was actually held captive. That was until the arrival of two new players: Costco and Aldi. In recent years, Aldi and Costco have grown enormously in Australia, but how did they manage to achieve that?

 

Thinking big and pricing small

Costco and Aldi have very different formulae and that’s what’s made them so successful. Costco has a wholesaler formula, attracting businesses as well as many consumers. There are no separate storage locations; the warehouse is the store. This means no extra costs for storage and distribution. Products can also be bought in bulk. Everything’s big. But that’s not so unusual because after all it is an American company. In the USA, large portions and pack sizes are very normal. Costco keeps its prices low and also opens filling stations next to the stores. The price of fuel can be as much as 10 Australian cents lower than the local competitor. What more do you want as a consumer? Cheap shopping and cheap fuel. And in the Australian Outback, where distances are considerable, that’s a golden opportunity for Costco.
Aldi has a completely different formula. The stores are small compared to Costco. The products are offered at low cost. There’s not a lot of in-store fuss. Just as here in Europe, the stores are basic. You take your products from the box on the shelf. They advertise that they have the lowest prices with the highest quality. Who wouldn’t want that? And they do it well. Since arriving in Australia in 2001 they have opened more than 400 stores already.
The arrival of these new supermarket chains has given the consumer more choice and this gives the market a new incentive to innovate. In turn, that is good news for our clients who want to conquer Australia because that can also create new opportunities for them.

Johan van Diermen
CEO Export Partner