Grocery price website under fire

Posted by Daniel Palmer on 7th August 2008

The GROCERYchoice website continues to come under attack, with independent supermarkets, the Federal Opposition and leading retail industry bodies all indicating a lack of support for the scheme.

The site, which highlights to consumers the cost of certain baskets of goods at different grocery chains in their area, has been criticised as a “stunt”, “unfair” and too “broad” by some sections, but the Federal Government continues to defend the website.

As a host of media outlets have reported, the ACCC-operated website found that Coles was cheaper than Woolworths on a complete basket/trolley of groceries in 52 of the 61 regions – a figure that disappointed Woolworths. On the prices of a basic staples basket, however, Woolworths reversed this figure – coming out ahead of Coles in 49 of 61 regions.

But how relevant are such comparisons?

“We watch our competitors’ prices across about 16,000 products. This survey looks at about 500,” a Woolworths spokeswoman told The Australian.”In our industry, month-old information is of limited value for consumers, because prices change daily.”

The independents, which includes IGA, and Franklins consistently came out behind Coles and Woolworths in the regions where they operated. However, independent supermarket operators are disenchanted with the findings because all independent operations are grouped together. And, lest we forget, the ACCC found in their inquiries that independents struggled to compete on price with the majors due to a number of issues e.g. Coles and Woolworths have greater supply chain efficiencies due to the extensive nature of their operations, with Metcash admitting that “at best” its IGA stores are price “followers”.

So, despite trying to promote greater competition, does the GROCERYchoice website instead inadvertently send people away from the independents and Franklins and redirect them to Coles and Woolworths? Critics argue that the GROCERYchoice website might merely penalise the small competitors (ALDI aside – and, from a global perspective, they are not small).

The website does point out the value of shopping at ALDI and has paved the way for ALDI to become the third force in Australia’s supermarket sector, but, ALDI is a different type of supermarket to the others. It is a “discount grocery chain” which does not offer the same range of brand names as other supermarkets. The stock of private label goods is very high with many brands commonly seen at a Coles, Woolworths, Franklins or IGA not in stock. And, despite the flow of resoundingly positive publicity, even ALDI is concerned about the website as it places a N/A sign next to them for all comparisons except the basic staple basket. Consequently, they are concerned it may lead to consumers mistakenly believing that they don’t stock grocery items outside the basics like bread and milk.

It is argued that to make the price comparisons truly relevant the ACCC would have to identify the exact products they have chosen and which stores they have gone to (rather than just say Coles – Inner Melbourne, for example). This would allow consumers a greater understanding of the competitiveness of supermarkets in their area. But, they can’t do this because of fears that supermarkets will keep their prices down in those stores and on those product ranges only – which would then make the survey irrelevant.

Chris Bowen, Minister for Consumer Affairs, suggested upon responding to the ACCC’s report that the website would be revised to deal with any issues of retailers and consumers. “Over the coming months we’ll be working with retailers and consumer organisations to further enhance the website with additional information and applications to help consumers make more informed purchasing decisions,” a statement read. “The website will provide a guide to consumers as to the cheaper supermarkets in their region. Consumers will then be able to make their choices based on customer service, convenience and other factors.”

“The intention … is to provide consumers with that choice or information over time about one supermarket chain versus another … against a basket of goods and we’ll continue to refine this over time,” Prime Minister Kevin Rudd added.

Retail body, the Australian Retailers Association (ARA), has urged the Rudd Government to look at other issues, which may be impacting grocery prices. “Labour rates and occupancy costs are the two significant overheads for retailers. Currently the cost of occupancy is well above what the retail sector should be paying as a percentage of direct costs to bring goods to market while maintaining a sustainable profit margin,” ARA’s Executive Director Richard Evans said. “If the Government really wants to reduce grocery prices they should be showing some leadership on the issue of retail leasing.”

“We need to start finding real solutions to reduce grocery prices rather than the smoke and mirrors approach the Rudd Government has taken so far with unit pricing and the GROCERYchoice website,” Evans claimed. “With the mooted labour reform, award modernisation and the introduction of Emissions Trading Scheme (ETS) there is a lot of uncertainty for retailers at the moment.”

The Australian National Retail Association thought the website concept was a little “broad”. “We welcome anything that helps consumers make informed choices about where they shop, however the GROCERYchoice website takes a broad-brush approach. It is not specific to towns and suburbs and the information will be out of date fairly quickly,” ANRA CEO Margy Osmond said.

The Liberal Party has condemned the site as “anti-competitive”. “In claiming that the prices of independent supermarkets are generally higher than for the large chains, no consideration is given to value for money from the convenience, quality and customer service provided by independent supermarkets,” argued Julie Bishop, Acting Leader of the Opposition. “Far from promoting competition, the website presents highly selective information that cannot provide an accurate picture of the value for money provided by individual supermarkets.”

The GROCERYchoice website met with great interest upon launch, with 517,000 hits in its first three hours of operation yesterday.

It can be found at: