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The Gilbert Review, led by Australian lawyer Danny Gilbert AM, gathered feedback from a large number of stakeholders and determined that the retailer had failed to engage with the community properly.
“The Gilbert Review has made it clear that we did not do enough in this community to live up to the best practice engagement to which we hold ourselves accountable. In particular, we did not do enough stakeholder engagement with a range of Aboriginal and Torres Strait Islander communities and organisations,” Woolworths Group chairman Gordon Cairns said in a statement on Thursday morning.
The panel also made recommendations to Woolworths about internal and external processes. The Board intends to release the panel’s findings along with its own response by mid-June.
On a Thursday morning conference call, Woolworths Group CEO Brad Banducci told media that he was not disappointed by the panel’s decision.
“I’m not disappointed at all,” Banducci said, adding that it was important to pause and reflect on the lessons learned.
He said, however, that there is strong support from many consumers for a Dan Murphy’s store in the NT, but he wouldn’t confirm whether it’s something Woolworths would consider in the near future.
“We know that our customers want one, but we need to do it in a more responsible, engaged, thoughtful manner,” he said.
“We will need to review the report and it will be up to Steve [Donohue] and the Endeavour business to reflect on [whether to enter the state].”
The demerger of Endeavour Group remains on target for late June with documentation expected to be released in mid May.
Jana Bowden, an expert in consumer psychology and consumer engagement at Macquarie University Business School, told Inside Retail that Woolworths “dodged a bullet”.
“Woolworths has made a shrewd business decision in deciding to cancel the Dan Murphy Darwin store. It’s avoided a potential firestorm of negative public sentiment and brand reputation backlash that would have no doubt ensued,” she said.
“Getting ‘purpose’ right in the current climate is about understanding your stakeholders, engaging with your community, and providing products and services that work towards supporting their needs and their wellbeing. It’s about making smart branding and business decisions that are in the interest of the community, not against your community.
According to Bowden, now more than ever, consumers expect brands to deliver upon moral, social and ethical goals.
“At the extreme, brands that blatantly place profit over people and that engage in business decisions that place the community at risk are guaranteed to lose public trust. Equally, brands which pay lip service to brand purpose and then carry on with business as usual focusing on sales will lose their customers goodwill,” she said.
“Opening up a store close to three Aboriginal communities already at risk of alcohol-related harm is not a business move that sat well in the hearts and minds of Australians.”
Woolworths beats Coles on Q3 sales
The news overshadowed Woolworths Q3 results announcement, which showed a 0.7 per cent dip in Australian food sales, the retailer faring significantly better than rival Coles, which on Wednesday reported a 6.1 per cent sales drop over the same period. Across the Tasman, the situation was a little more challenging as total sales declined by 6.9 per cent.
Banducci echoed Coles CEO Steven Cain’s remarks on the normalising of consumer shopping behaviour and given the first three “volatile” weeks of April, he also expects supermarkets will continue to cycle through the unprecedented spikes of last year.
“While food customers are still shopping less frequently, the growth in the number of items customers put in their baskets is slowing. Customers are also shopping more on weekends, state-based performance is becoming more balanced and there is less divergence in trading across the fleet, other than in CBD and transit locations,” he said.
Total Group sales reached $16.5 billion, a 0.4 per cent rise on Q320, with Big W, Endeavour Group and hotels all putting “above-trend” performances. Big W reported total sales growth of 18.3 per cent, with no slowdown in the final six weeks, while Endeavour Drinks’ total sales lifted by 6.3 per cent.
Bowden said the ferocity of purchase in grocery is, unsurprisingly, “just not what it was” in March 2020.
“As consumers, we have cut our volume of purchase per shop, and we have cut spend on particular categories like fresh produce – we are normalising spend,” she told Inside Retail.
“I’d speculate that we will be heading back into supermarket war territory shortly as the two big brands go head to head to claw back sales and maintain market position. We are already seeing that trend through increased promotional activity – spend-and-gift giveaways like the Discovery Garden [initiative] and the reintroduction of the Down Down campaign for Coles.”
Online sales continue to soar
E-commerce sales across the Group continue to grow strongly, rocketing 64.2 per cent in Q3 to $1.3 billion. In Australian food, online sales increased by 90.5 per cent to $878 million with penetration of 7.9 per cent, compared to 5.5 per cent at Coles.
“There’s a clear winner here in terms of the two brands at present and it looks like online is set to be the new fighting ground for supermarket sales going forward as consumers continue to remain online,” Bowden said.
In New Zealand, online food sales increased by 37.9 per cent with sales penetration of 11.6 per cent.
Bowden said there’s a real opportunity for supermarkets to capitalise on the “astronomical rise” in online sales.
“Australia Post data indicates that 82 per cent of all Australian households shopped online in 2020. Consumers’ expectations are set and having trialled online shopping, the benefits to consumers are clear – it is convenient, it’s cost-effective and it is less risky in terms of germ transmission.” In relation to the planned takeover of PFD Foods, Woolworths said the PFD-owned property will be excluded from the sale, with any proceeds from property sales to go to charity organisation Smith Family. The retailer also flagged that the timeframe for regulatory approval has been extended to February 2022.