Australians have a ‘persistent degree’ of inertia when it comes to their choice of supermarket, which is likely to explain the dominance of Coles and Woolworths more than a lack of access to alternate options, according to new research by the e61 Institute.
Using a novel source of data - consumer bank transactions linked to store locations - the report presents new evidence on sales concentration and consumer inertia at the local level.
The ACCC recently reignited debate about the power of the supermarket giants when it accused Coles and Woolworths of misleading shoppers by claiming they were dropping prices when in fact they were raising them.
e61 economist Matt Elias said the new research helped explain why consumers may not be responding dynamically to unusual price shifts.
“The data shows us that Australian consumers are fairly loyal to a single supermarket brand even in areas where they have access to all four major options - Woolworths, Coles, IGA, and Aldi,” Mr Elias said.
“What’s causing the inertia is hard to pinpoint, but this research does suggest that a lack of options is actually not a primary driver. Customers are repeatedly revisiting the same store locations week in, week out for their big shopping trips, even when alternate options exists.
“What we do know is that consumer inertia can reduce competition. If consumers aren’t exploring potential better options at alternative stores then this confers market power onto supermarkets.”
The research conducted across NSW and the ACT finds that brand loyalty persists over long periods of time, especially for Coles and Woolworths. 70% of customers that did their largest shops at Woolworths in a given month also did so one month later. 62% continued to do their main shops at Woolworths six months later. For Coles the equivalent figures were 62% after one month and 55% after six months. For Aldi the figures were 48% after one month and 37% after six.
“Inertia can reflect a lack of consumer knowledge about price benchmarks. Price comparison between supermarkets can be difficult for a basket of groceries and the complexity grows with the length of the shopping list.
“One policy option worth exploring would be to set up a government-supported digital price comparison platform, similar to FuelCheck NSW. Such platforms have been successful overseas where they have resulted in price declines.”
Contact details:
Anil Lambert 0416 426 722 / [email protected]
