Coles And Woolworths Case Study

Managing Supply Chain Management: Coles/Woolworths vs. Suppliers

Introduction

Coles and Woolworths are too leading supermarket giants in Australia. In the world Coles and Woolworths ranked 19th and 15th among the selling retailers (Knox, 2014). Coles has started first supermarket in 1960 and till 1973 company achieved its primary aim of having supermarket in every Australian city. Cole’s service has more than 18 million transactions each week. Woolworths started fresh food stores around 80 years back in 1924 at Sydney Australia (Kahwaji, 2014). Coles and Woolworths are having around 75% market share in Australia grocery market. Coles and Woolworths are sharing too much market power between them. Australian grocery market has the duopoly of

The program named Active retail collaboration (Knox, 2014). In that program suppliers are divided into a list of top 50 and tail suppliers were need to pay rebate to Coles for improving their efficiency. Tail suppliers faced the dominance and undue power pressure of Coles. Red bull the energy drink supplier faced a $400,000 cut in supply cost with a rebate of $200,000. On the same lines Coles launched “ARC supply chain boot camp” in the same year. In this camp suppliers were designated into three tiers with tier 3 containing 220 suppliers. More than 30% business of Coles was coming through those suppliers. The tier 3 suppliers faced the harsh and brutal behaviour of Coles’s manager when they threatened suppliers to end their supply contracts and a range review of their current products. 62 suppliers were escalated for either termination of contract or a range review of their products within 35 days. Coles’s manager took decision in hurry for e.g. cancellation of planning and promotion of Stuart Alexander and a range review of Oates cleaning products. The tier 3 suppliers were forced to take on the spot decision for rebate amount. Many suppliers feel disturbed and frightened with Coles’s dominant

Food Retail Sector (Government, 2014)

Power imbalance between Coles/Woolworths and Suppliers

There is a complete imbalance of power between Coles/Woolworths and their suppliers. The Coles and Woolworths have 741 and 840 supermarkets in Australia as of 2011 (Keith, 2012). In 2011, Coles showed their dominance over the suppliers. The company managers were not ready listen to the supplier’s problem. They want negotiation and dealing at their own cost. This power imbalance is creating a mess in the market because suppliers try to negotiate other retailers i.e. Aldi, IGA etc.

This increasing duopoly of Coles and Woolworths will make market penetration very difficult for new entrants. At the same time these two will make market anti-competitive and it will leads to three major concerns i.e. Selling power, buying power and retail.

a. Selling Power- The consumers will be bound to purchase the product either from Coles or Woolworths. This will decrease the chances of discount on various products.

b. Buying Power- When the buyer power will be concentrated only to two major giants. They will overpower the suppliers and producers as Coles already done in 2011. They will display the material in shelves as per their choice (Knox,