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Published 12 March 2013 12:43, Updated 13 March 2013 11:41
Safeway founder Don Fraser says both Woolworths and Coles have been successful in lowering prices on popular items. Photo: Noel Hendrickson
The man who helped bring Safeway to Australia, Don Fraser, says regulators are too heavily scrutinising supermarket giants, Woolworths and Coles, which he does not believe is warranted.
Fraser was the founding director of Safeway in Australia before it merged with Woolworths. Now the chairman of retail design company, Red Design Group, Fraser is a consultant advising the big supermarket chains and others, on retail innovation.
He says both Woolworths and Coles are “good corporate citizens”. “They have to be, their brand and reputation is at stake,” he told BRW.
Fraser, who has had a long career in the food retail industry with major companies in the United States, United Kingdom, Spain, Asia and Australasia, says he does not believe suppliers are being unfairly treated or that the dominance of the supermarkets is detrimental to consumers.
“There are so many suppliers that have been embraced by Coles and Woolworths,” he says. “If they work with the retailers, if there’s a good relationship, they end up with good results.”
There are so many suppliers that have been embraced by Coles and Woolworths ... If they work with the retailers, if there’s a good relationship, they end up with good results.
The Australian Competition and Consumer Commission’s chairman Rod Sims is investigating complaints into the major supermarkets’ treatment of suppliers and whether it could lead to higher food and grocery prices.
Sims told The Australian Financial Review this week that more competition in the market could have the unintended impact of higher prices, although he has since backtracked saying, it’s “unlikely”.
But Coles has seized on the comments, saying families should not be forced to pay higher prices. While Woolworths has not commented, Coles says the ACCC investigation will allow multinational food companies to boost profit margins and thereby result in higher grocery prices.
Fraser says regardless of whether prices of all products across supermarket shelves are lower, both Woolworths and Coles have been successful in lowering prices on popular items. “The issue isn’t that prices [might] be lower across the range,” he says. “It’s important that prices [of goods] that the customer most frequently buys is lower. That’s what impacts on the household budget.”
He says the concept of “loss leaders” – lower priced items that entice customers into the store – is not a new one. “It’s one of the oldest concepts, used in pre-historic supermarkets, and is a function of retail,” he says.
Fraser started his career in food retailing with Safeway in California, and later helped set up stores in the UK and Australia. He was also one of the key players behind Woolworths’ “fresh food leader” strategy, which helped revenues soar and saw it become Australia’s biggest supermarket retailer, as well as one of the world’s most profitable companies.
In the half year to December 30, 2012, Woolworths’ total group sales hit $30.7 billion, up 3.2 per cent on the previous corresponding period. The result was driven by a 3.7 per cent rise in sales from the group’s supermarket division to $26.2 billion.
Fraser says the big supermarkets are succeeding because they are ahead of other supermarkets in multi-channel retail strategies and using technology in store.
He points to Coles in Melbourne’s Southland Shopping Centre as an example of a store where technology, such as interactive computers on shelves telling customers about the product on sale, has been used to enhance the shopping experience.
Fraser says the independents need to lift their game in retail innovation if they want to compete with the big chains. He said they need a point of differentiation. “There’s some brilliant independents such as Leo’s in Hartwell [Victoria],” he says. “If you’re an independent retailer that’s forged a close relationship with your customer, you have an advantage over the corporate chains, which have the same in-store concept. In Australia, the independents simply haven’t done well enough in meeting local needs.”
Fraser was previously the director of fresh food development at Dairy Farm International, a Hong Kong-based supermarket. He was also a regional director for the subsidiaries of Woolworths New Zealand and Franklins in Australia.