Retail competition most fierce for the Australian small food retailer

Posted by AFN Staff Writers on 14th March 2013

Of all Australian small businesses, competition is most fierce for businesses selling food and groceries, according to the latest findings from market researcher Roy Morgan Research.

Research found that competition affected the business performance of 55 per cent of small food retailers, such as grocers and convenience stores, in the last 12 months. This figure is 23 per cent higher than for small businesses (those with fewer than 20 employees) across all sectors, and 12 per cent higher than other small retail businesses.

More than half of small food retailers reported underperforming in the last year, which is 7 per cent higher than the small retail average. Nearly 40 per cent of small food retailers say competition will be a greater influence in the coming year, compared to 26 per cent of other small retailers and 21 per cent of small businesses across all sectors. Only 5 per cent of small food retailers expect competition will lessen.

Despite the high levels of competition, however, 45 per cent of small food retailers are confident about 2013 and expect their business performance overall will improve.

“The Australian Competition and Consumer Commission’s (ACCC’s) renewed interest in the competitive environment for food retailing is timely, as many small retailers – particularly food retailers – are facing difficult conditions in 2013,” said Nigel Smith, Director of Business Research at Roy Morgan Research.

“Small food retailers and hardware and gardening retailers are almost twice as likely as the average small business to expect to face increasing competition over the next 12 months,” said Mr Smith.

“Competition only benefits consumers when it’s maintained in the long term. Predatory pricing by larger retailers – and increased take-up by price-conscious consumers – may lead to fewer competitors, an ultimately detrimental situation for both consumers and the retail industry,” he added.

The research also found that 53 per cent of small hardware and gardening, and 52 per cent of electronics retailers also rate competition as a determining factor on overall business performance. Competition is less fierce in other sectors. Only 42 per cent of small clothing and footwear retailers and 37 per cent of furniture retailers reported that competition affected overall business performance in the last year. In small businesses across all sectors, an average of 32 per cent said business performance was influenced by competition.