Coles is one of the leading retail companies in the Australian market. Coles along with its main competitors Woolworths dominates the retail economy and captures around 70% of the population. In this research report various economic aspects of Coles are discussed along with its market structure, industry background, factors that affect the demand and supply of the products in the market and the elasticity of the demand. The slowdown in the retail sector of Australia is also discussed along with the possible reasons and solution. Thus, this report will help in strategising for the company in the next 5 years for proper growth aspects.
In recent economic scenario, there is extensive competition in several industries due to technological advancement and skilled workforce. It is also evident that the demands for products are growing at an accelerated rate and thus companies are trying hard to meet those needs. In each and every industry, companies are facing cut-throat competition and thus they are implementing innovation in their products and applying proper marketing strategies in order to gain more market share in the industry. In this research report, the retail industry of Australia has been analysed and discussed in order to gain an insight into the retail industry of Australia. One of the leading retail companies in the Australian market is Coles. In this report, the industry and the company is discussed with relevant statistics. The market structure of the industry in which Coles operate in is also highlighted in this report. The factors that influence the demand for the company’s products and the factors that influence the supply of the company’s products are also discussed. The elasticity of demand and supply in the industry are elaborated along with a recent impact of certain event in the industry. The main aim of this report is to analyse the performance of Coles what can be its strategy in the next 5 years keeping in mind the industry within which it operates.
Coles is one of the largest supermarket, consumer service and retail chain in Australia. The company operates in over 800 locations all over the country. The company was founded by George Coles in 1914 in Melbourne where it is headquartered at present. There are more than 100,000 workers in the Coles markets throughout Australia. Its biggest rival in the industry is Woolworths. These two retail giants almost cover 80% of the retail sales in Australia. There are other rivals like Aldi and Kaufland but Coles and Woolworths are in fierce battle with each other in the industry (Ceicdata.com, 2019).
Coles supermarket was initially a part of Coles group limited. In 2007, Wesfarmers purchased Coles and owned it till 2018. The company had achieved the sales of $7,657 million in the first quarter of 2018 and it was a 5.8% growth from the same quarter in 2017 (Power Retail, 2019). This increment in the sales and revenue is a result of continuous innovation and adding new products to their list of products offered. It is also believed that the company will also perform well in 2019.
They have Coles online catalogue which makes it easier for the customers to order at their convenience. There are several products that are provided by the company to its customers. These products include meat, Liquor, apparel, ready meals, Coles mobile, deli, dairy, fresh fruits and vegetables, bakery, baby products. They have also added kosher and gluten-free products for special diets (Coles.com.au, 2019). They undertake several promotions and marketing strategies in order to gain more customer base in the industry. Their promotion offers free shipping to the consumers if they order a minimum of a certain amount of products from Coles. They offer free products, money back offers, and has also presented Coles MasterCard for the regular purchasers (lifehacker.com.au, 2019).
The retail industry basically offers the customers household items such as groceries, appliances, clothing, personnel accessories, and consumer goods. This is one of the important sectors in the market which caters to the needs of the consumers for their daily activities and products that they need frequently and immediately. Nowadays it is even more efficient with the help of online forums. Nowadays people can sit at their homes and order through online sites. They get the products at their doorstep and do not need to physically visit the stores.
The retail industry of Australia is a booming one and it is continuously evolving and improving over the years. In a stable economy the retail industry is basically dominated by home-grown retailers like Coles and Woolworths. The customer base is also high for the industry as 24 million people who constitutes 90% of the population, are in urban locations.
Some of the industry statistics can be mentioned here. The revenue for the retail sector is around $173 billion and the annual growth is 0.5%. The annual growth of individual retailers differs significantly. The retail industry employs around 657,821 employees all over Australia. There are around 2,022 retail grocery shops all over the country. The retail sales growth was registered at 3.5% in March 2019, compared to 3.2% in the previous month. It is evident that the retail sector in Australia is one of the important sectors that contribute towards the GDP of the economy. Thus it is very important that the sector keeps a steady growth rate in the market. In the following diagram the retail sales growth is presented (Jahshan, 2019).
In the above diagram it is seen that the sales growth was higher during second half of 2018 and has falls in 2019. Thus, it is important to again boost the sales of the product in order to keep up with the GDP growth of the economy.
Now the market structure in which the company operates in can be discussed. The Australian retail industry basically operates in a monopolistic competitive market structure. Some of the characteristics of monopolistic competition can be stated here,
In this context it can be said that, the retail industry operates in a monopolistically competitive market structure. Some of the points can be discussed in order to relate the retail industry of Australia with the monopolistically competitive market.
One of the features of a monopolistic competition is gaining the customers through other processes rather than involving in a price war. Here, the retail sectors also involve in cut-throat competition through measures of promotion, offers and adopting extensive marketing strategies.
There are many companies in the retail sector in Australia but the main competitor of Coles is Woolworths in the market. Both these companies dominate and cover almost 70% of the population. There are other competitors in the industry who are Aldi, IGA and other online markets (The Balance Small Business, 2019). In the following pie diagram the market share of the Australian retailers can be highlighted.
(Roy Morgan, 2019)
Thus, the extent of market power that these two retail chains have can be seen through the chart.
There are several factors that influence the demand of the product in the market in a retail sector. These factors can be stated here,
So, these are the main factors that influence the demand for the products for Coles in the industry.
There are various factors which affects the supply of products in the market. These factors can be stated here,
These are the main factors that affect the supply in a retail industry.
Elasticity can be referred as the responsiveness of a variable in terms of the other variable. In a monopolistic competitive market, the elasticity of demand is elastic. That means if the price of a product changes, it leads to a larger decrease in the quantity demanded for the product. Similarly, if the price of a substitute increases, then it would lead to a larger increase in the quantity demanded for the product (Nicholson and Snyder, 2016). It can be shown in the following diagram,
In the diagram, it can be seen that in an elastic demand, a change in the price of the product leads to a larger change in the quantity demanded for the products. The difference from Q1 to Q2 is higher than the difference between P1 to P2.
In a retail sector, such elasticity can be seen mainly because the products that are offered by the retailers whether it is food, groceries, apparel or other tools are close substitutes of one another. Thus, if the price of a product increases, the consumers would prefer other close substitute goods and the demand for the product would fall significantly.
The two main factors that influence the elasticity of demand in the retail sector are,
These are the factors that influence the elasticity of demand for Coles in the market.
In December 2018, it was reported that the Australian retail sector has gone under shock as the sales have fallen badly. The retail sales have increased only by 0.1% in the last quarter of 2018. It is seen that there are significant fall in the retail growth and sales. The growth in population does not lead to a growth in the consumer goods demand significantly. One of the reasons for such slowdown can be mentioned as a fall in the property prices in the real estate market. It can be stated that the falling home prices are influencing the consumer behaviour and slowing down the household spending (Scutt, 2019).
The households are curbing their spending due to lower income growth and their confidence has fallen because of the existing volatility in the financial market and declining prices for the real estate industry. So the demands for the products are not increasing which leads to necessary supply. The price and quantity is not affected significantly. The government need to stabilise the economy in order to increase the growth in the retail sector again (McGreal and Kupke, 2014).
In conclusion, it can be said that Coles is a leading retail companies in the Australian market and it is performing soundly in the industry. In the absence of many competitors, Coles only face threat from Woolworths who is giving a tough competition by applying various offers and increasing its customer base. Keeping in mind the market scenario, Coles need to take aggressive strategies of promotion i order to gain more market share in the industry. They need to take proper pricing strategies as it will also affect the demand for the products in an elastic demand structure. These strategies will help Coles being the market leader and for its extensive future growth.
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