Posts Tagged ‘competition’

I bet Bernie would like to work for Apple instead

November 10, 2011

The boss of Aussie department store Myer, Mr Bernie Brookes, was asked yesterday about increasing harmonisation of product prices across countries (presumed to be a response by suppliers and retailers to the exodus of customers to online commerce).

He said (with a delightfully Aussie oratory flourish):

“If you don’t do it the customer leaves you en masse. It is Darwinian shit: if you don’t do it you are not going to sell it.”

Damn the perils of actual international competition.  I bet he wishes he was in Apple’s big boots on this, as they seem very capable of selling the exact same song/app etc on iTunes for considerably different prices from market-to-market. See this link for a nice bit of comparative work – Aussies really get screwed.  I guess we’re the Easter Island of Darwinian natural selection.

Dueling Duopolists, or, who should we cheer for when bullies battle?

March 24, 2011

The Aussie news headlines have been buzzing in recent days with the competing cries of our embattled brewers and the ‘on the side of the consumer’ supermarket giants, over an alleged effort by the latter to sell the majors’ beers as ‘loss leaders’.  See here and here for a reasonable summary.

This is the latest staple product to get this sort of a run (after milk and petrol) as Woolworths and the revitalised Coles (as part of Wesfarmers) engage in some much-missed competition.  Of course, it isn’t competition via ‘across the board’ price cuts, but, rather, through trying to switch buying preferences from one chain to the other (utilising the grocer’s associated liquor chains).

And poor old Foster’s (and presumably the much quieter Lion Nathan) are worried that this (alleged) predatory pricing will hurt their margins, and those of independent liquor retailers.

The reality of all this is that we’re talking about two pairs of behemoths locking horns, and competition here is a very different beast to that envisaged in perfect markets.  Look at the numbers:

– Foster’s (48% market share) and Lion Nathan (44%) amount to 92 percent of the Aussie beer market

– Woolworths and Coles/Wesfarmers amount to roughly 50% of the Aussie liquor retailing market (with most other sales through small, independent retailers)

– Woolworths (around 40%) and Coles/Wesfarmers  (around 35%) amount to roughly 75% of the Aussie grocery market

Those are the sort of market shares we called oligopolistic, or indeed duopolistic, with competition often reaching a calm equilibrium through effective price signalling and/or maintenance of market share.

Foster’s are kicking and screaming, however, due to concerns about the buying power of the two retail giants. Now, if Foster’s had a significant retail arm it might be able to curb such a threat (and earn more of those nice rents from the duopoly power).

But back in 2003 the brewer sold off Australian Liquor and Hospitality Group (ALH), which operated 131 hotels and 109 bottle shops. ALH now runs 285 licensed venues and over 450 retail liquor outlets.  And guess who now owns 75% ALH… Woolworths.  It seems Foster’s handed Woolworths the stick it is now being beaten with.

There’s talk that this behaviour will all come under the scrutiny of some eagle-eyed politicians in Canberra in the coming weeks.  Now, we’d hope they know a lot about duopolies (i.e. systems with two powerful parties)…

Give the man music

September 26, 2010

This blog has been silent of late due to my travels to, first, a conference in Rome, and then, a couple of weeks of R&R around Puglia.  As such, my ponderings have been banking up while I waited for decent internet access.

All this travel and stays in hotels of various quality and other accommodation has got me thinking about lost competitive opportunities for hoteliers.  The one that is really starting to aggravate is the failure to provide facilities for listening to music.

In a world were huge numbers of travellers are carrying Apple music players of various descriptions, I am stunned that it has not become de rigeur to provide an iPod dock in hotel rooms.  I would love the chance to move beyond headphones or the tinny speaker on my iPhone.

The cost to a hotelier would be low (decent units go for less than $100), and the payoff in terms of satisfaction would be high.  As travellers become more and more linked, and more vocal, through feedback sites such as Tripadvisor, hotels should be looking for simple but effective ways to make the stay more enjoyable and to differentiate themselves from others.  This would be one of them.

I can only recall one hotel that I’ve stayed in which provided a dock. It rocked and was well-named!

Another one bites the dust

July 2, 2010

The highly oligopolistic Australian supermarket industry just lost another multinational player.

South African grocer Pick’n’Pay (#143 on Deloitte’s list of global retailers by size) has sold off its Aussie holdings (the Franklins branded supermarkets) to our biggest grocery wholesaler Metcash.

Metcash (which was once South African-owned) supplies the very large network of 1000+ independently owned IGA stores. The 77 company-owned Franklin stores will soon be sold off to what are effectively franchisees locked into a supply arrangement with Metcash (now there’s a nice strategic play with respect to reduced bargaining power of buyers).

Franklins has proven a very tough company to run. It was sold off by Hong Kong’s Dairy Farm (#128) back in 2001 after they couldn’t turn a decent profit against the Woolworths and Coles behemoths.

Irrespective of the slow rise of Aldi and prospect of a Costco challenge, the rivalry in this market is mighty nasty for anyone without the big two’s economies of scale and reach.

Competition isn’t always black (and decker) and white (goods)

May 6, 2010

As more rumours spread about what exactly Woolworths’ new hardware business will look like, we can see that perhaps it isn’t just Bunnings (and therefore Coles’ parent Wesfarmers) who should be worried about a shift in their competitive environment.

According to this story, the new entrant (which might be called Masters) –  a joint venture between Woolies and US giant Lowes – may not just be selling the usual hardware merchandise.  Also on the cards are whitegoods (i.e. fridges, washing machines, dishwashers etc).  That would certainly be a challenge to some of the big players in that retail segment, such as Harvey Norman and The Good Guys.

This isn’t just a random diversification choice either, as Lowes has extensive experience with this market, and presumably can suitably integrate the offerings into the retail mix.  It will be intriguing to see whether this upsets the likely co-located store mix for the firm, as some homemaker-type centres may find this new challenger upsets their tenant mix.

Another interesting titbit in the story is the possibility that WooliesWareHouse (I’ve decided to grant them that brandname) will go down an explicit ‘Do It For You’ path, which would be a neat differentiation position in the hardware space.

This case in progress serves to demonstrate the blurry lines between markets and the scope for competitors to slip across from adjacent markets (among many other strategic lessons).