Coles have announced they’re moving into… finance.
Coles and Woolworths already have a market share of 72.5 per cent of the $82 billion grocery sector. In addition to their food and liquor retail empire, they now offer petrol, insurance, an increasing amount of pharmaceutical products, and credit cards to name a few.
Coles has announced a joint venture with GE Money to offer small personal loans. GE, being a clever company, have identified this JV is a great way to offer their products to Coles’ significant customer base. You’d expect Coles’ next step would be into additional finance products such as banking / financial planning. Woolies are expected to follow suit shortly.
You have to ask: are Coles and Woolworths taking over our lives…?
Are we happy with this? Consumers will ultimately decide with their store-branded credit cards (and associated rewards points). If these services are judged on price alone, it’s difficult for many businesses to compete with the might and clout of these two behemoths.
But hey, if I pay less, and it’s easier for me, who cares… right?
What will be the impact on small business owners – and ultimately, our ability to choose alternatives? We’ve already seen a consolidation of small grocery and corner stores. Do the growing stocks of pharmaceuticals on supermarket shelves mean that pharmacies are in danger – and will customers choose to trade off the service and expert advice they receive from their local pharmacy in return for cheaper prices? What will the non-financial impact be for consumers?
I believe there are dangers in treating financial services as commodities. The cheaper product is not always the best. Like pharmacies, service and expert advice can have a huge impact on the outcome. It’s hard to argue about increased competition, as consumers are the winners – as long as its a level playing field.
Many people are also concerned about the market power Coles and Woolworths have developed. The dairy industry is an example of what can happen if power is concentrated too heavily – suppliers can suffer (to the point of having their sales price dictated to them). This is especially a factor with these two powerhouses pushing their own in-house brands, which have significant price and other advantages which put competitors at a disadvantage.
I much prefer to shop locally and support small businesses. They’re the heart and soul of our country, and employ 50% of employees.
Consumers are smarter these days. We have more knowledge, and we have an awareness of the collective power we have to affect what happens by the choices we make. Choosing the convenience of the Big Two may save you a dollar and a few minutes, but it can cost you in other ways – especially if you no longer have the choice to shop at your friendly local store, and keep the Big Two honest.
Smart small business owners can differentiate yourself from the Big Two – say, become synonymous with outstanding quality and freshness, or excellent service, or simply remembering your customers’ names and forming a relationship with them (or a combination). You need to identify your point of difference – why someone would shop with you rather than the big two, where they have the convenience of getting insurance and a personal loan while they’re at it. But if you’re smart, and you have a clear strategy, you can survive – and thrive – in this constantly changing retail landscape.