Consumer inertia key to understanding supermarket competition issues: new research
e61 Institute Media Release
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.”
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7 comments
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heather -
Baby Jewels -
Lyndal -
paul walter -
Baby Jewels -
leefe -
paul walter
Return to home pageA lot of factors play into peoples unconscious choices, however what if people recognized that if they stopped buying certain ‘brands’ and items from their lazy default choices, two things could happen!
The price would drop or the item removed from sale altogether.
The other possibility is that they could find a much better and cheaper ‘brand’ and item either via a third retailer i.e. Aldi cheaper and brands just as good if not better, or they could actually discover real food from a Market!
There’s a thought.
This doesn’t surprise me one iota. We also have persistent inertia when it comes to politics. We know our governments are doing the wrong thing, on climate, on housing, on genocide, and so many other issues but I guarantee 90% of Australian voters will vote exactly the same way next election as they voted in the last. So the problems are ongoing. I’ve always said, the problem is with the voters (and consumers) – we get exactly what we deserve.
Sadly, I don’t think the bank data is telling the entire story. I am able to access all four supermarkets and my habits are quite set. But what I need and things like convenience and time constraints affect what I buy and where. Aldi gets my main shop: cheaper and plenty of good quality, but they don’t stock everything I need. Also they are a little more difficult to get to from my home. In a given period, I probably spend the same at Coles over several top-up shops. Sometimes I want particular branded items that Coles sell, and sometimes,I have a gift voucher to spend. The Coles store is in the middle of town, convenient to the newsagent, 3 chemists and the Post Office, and in walking distance from home. Our IGA is close to Coles so has the same physical attraction. I would love to shop there more but they are definitely the most expensive of the four stores. They have the quality and range with a real deli section, staffed by human beings, and an excellent range of health foods that you can’t buy anywhere else in town. The quality of their green groceries and butchery is the very highest. Also, they employ my grand-daughter! Which leaves Woolworths, dearer than Aldi and Coles and further from my home. I rarely shop there, so I don’t know my way around and that leads to mistakes in what I purchase there. Unless I was chasing a particular special, I have no need to go there.
It led me to wonder what causes the “inertia”. I hope they are not blaming the victim. People would indeed prefer to have things like shopping simplified-like in the old days, when you went into a shop without understanding you were probably going to get ripped off. The spinners and shills seem to have created a world that pressures people to seek “escape” from the rat race, this somehow clouds their judgement. We don’t understand that all of this confusion is perfectly arranged to suit the people who have us active in this treadmill.
Are people inert or just half-brainwashed?
Yes, Paul, life is busy, complicated and stressful, but sometimes, it’s because we’re our own worst enemy. If you know you’re being ripped off, let the store know and don’t buy it. If you’re unhappy your government and the opposition support genocide, don’t vote for them. Why on earth would we think that only Dutton or Albanese can run the country safely, when the opposite is clearly displayed?
For me, it’s nothing to do with inertia: the only supermarkets within a 40k radius are the Colesworths in the nearest major town. I get some things at one and some things at the other (depending on price and availability and preference for some store-branded products) and most of the fresh produce from the Farmers Market.
Build an Aldi down here within practical reach and I’d be in there like a shot.
Yes, I know Jewels. Complicity is epidemic in Oz.