A definite answer to the above question will not be fully clear for at least another 18-24 months until the majority of Coles stores are refurbished & Woolworths has rolled out its "Danks" hardware stores in competition to Wesfarmers' Bunnings.Nevertheless, Ian McLeod (above) the boss of Coles has rattled Michael Luscombe & Woolworths in the two years since he took over the ailing giant & may very well go all the way & regain the retailing Mojo back in the next few years!
The roll out of Coles' new stores have certainly been a revelation in supermarketing retailing in Australia. I have previously written in my blog about the Coles store at Stockland Balgowlah in Sydney & the innovative "Fresh Markets" retailing concepts that are being trialed in that store.
It suffices to say that Woolworths have been alarmed to the point that they have recreated the concept in a new store format in Caringbah in Sydney, even though their CEO Michael Luscombe initially dismissed the format as too expensive!.
Not that the art of copying is anything new in the Woolworths corporate culture! In fact I would consider Woolworths as master copiers! They are great at rolling out other retailers' ideas & skillful at implementing concepts better than businesses who originally created them! Just about every single new idea in various Woolworths units in the past 20 odd years has been copied from US & European retail giants. and the same applies to Coles & Ian McLeod's admiration for the likes of Walmart for whom he worked for previously. Both companies would of course rightly point out that watching competitors' ideas is a must & that is what they are doing.
The major factor favouring Wesfarmers & McLeod was however reported in the Weekend AFR on Saturday 25th September:
Coles will be contributing to approximately 25% of Wesfarmers EBIT whilst Supermarket operations are expected to generate 80% of Woolworths' EBIT in the next few years. This will giver Woolworths less scope to grow sales by reducing prices as this will affect earnings to a much greater extent than Wesfarmers' would if Coles embarked on the same strategy.
Nevertheless, whilst Michael Luscombe will be watching Ian McLeod's progress at Coles very closely, the main strategy for Woolworths will still focus on attacking Bunnings rather than Coles.
The role out of hardware stores in the joint venture with the US giant Lowes under the banner of "Danks" will commence from next year. Woolworths hope to swiftly take a big chunck of this lucrative market away from Wesfarmers.
And undoubtedly many business commentators will cheer the introduction of what they will term "more competition" in the hardware sector! he toothless ACCC & its much loathed Chairman Graeme Samuel will turn a blind eye to the ever increasing duopoly power of the two retailing giants whilst small hardware store owners go out of business!
