Woolworths bashing has become a national pastime for commentators. And so it is incumbent on each one to ensure that a ‘bandwagon’ movement doesn’t develop and snowball. There is always a ‘but’. And in this case it is a big ‘but’. Retail 101, Business Economics 101, Logic 101 and Accounting 101, teach us that a six-foot man cannot fit into a four-foot coffin. In other words, if you buy an item for $1 and you sell it at $1.05 and your overheads are more than five cents per i
tem, you are losing money.
Undoubtedly the most ludicrous notion I have come across in my many years in retail is the latest one from Woolworths. They intend to take Aldi on – on price!
Woolworths was founded on December 5, 1924. They have an infrastructure and culture developed over the past 92 years. This includes tangibles and intangibles. These are their unique differentiators and part of their bloodstream.
To make a paradigm shift with respect to these factors could well be fatal. That is why most companies don’t risk this. Reinvent – yes. Transplant the liver, kidneys, heart and other vital organs all at once – no.
A toddler could tell you that just as you cannot fit a six-foot man into a four-foot coffin, so you can’t compete with Aldi without taking out a knife bigger than Crocodile Dundee’s. And that would be terminal.
Where does this strategy originate? Is it home developed? Was the board unanimous on the decision, assuming it went to the board? And what other competitive strategies were considered?
It is only fair to give new Woolies CEO Brad Banducci a fair go. Maybe this ridiculous decision was made some time ago. But if I were in Brad’s, I would do a 180-degree on this one.
Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702
