Woolworth v Amazon

Introduction

Woolworths Australia was founded in 1924 as an Australian based retailer giant. The company is operating in segments including Australian Food, Endeavour Drinks, Hotels, BIG W and New Zealand Food (Reuters, 2020). It has a current market share of 34% followed by 27.6% market share of Coles and 11.4% market share of Aldi (see figure 1 below for market shares).

Although the company has been taking leaps in market share expansion, the evolution of digital technology has been posing many threats for its profitable operations recently. Amazon, as a major digital business player, has recently decided to jump in the Australian grocery market for competing with Coles and Woolworths (Verdict Foodservice, 2019). Huge reduction in prices by Amazon and its superior services are threatening the margins of Woolworths (Pollak, 2017). Hence, this report is written for analyzing the internal and external issues faced by Woolworth and providing the solutions to grapple with the major two threats i.e. corporate staff’s insufficient training for handling online orders and dwindling supplier relationships.

Situation Analysis

Internal Capabilities

• Ability to attract and retain the highly experienced employees at the workplace
• Dedicated supply chain of fresh foods and healthy food products (Woolworths, 2020)
• Ability to deliver the value to its customers and enhance profitability (Australian Food News, 2017)

Core Competencies

• It owns world-class supply chain focused on efficiency and cost cutting for managing the unnecessary expenses (Arli, Dylke, Burgess, Campus, & Soldo., 2013).
• It is well positioned due to its slogan “the fresh food people” as it created the differentiated image of healthy products amongst consumers (Biddle, 2016).
• It implements innovation concept at several stages of project including “re-fresh” and the “new idea program” in petrol retailing. 
• It is vertically integrated with suppliers so that its market power can increase. 

Current Challenges

• Declining cloth sales due to aggressive promotions by the competitors
• Online grocery market is constantly subjugated by the major supermarkets and disrupted by the discounters like Aldi and Amazon (Chanthadavong, 2020).
• Failure to deal with rising online grocery demand by Australians recently. According to survey, 73% of the young consumers shop online  (Bodgan, 2018). 
• Its online shopping system doesn’t allow ordering fruits and vegetables by weight. Although the costing is by weight but the quantity is done using item count. There is also some variance between the anticipated and actual weights delivered at door step (Finders, 2019).
• Deliveries are done at an elevated temperature (as much as 12.30 C) for items like Chicken (Bodgan, 2018).
• Woolworths’ employee training packages are not efficient in training employees for speak-up hotline and email services. The e-learning modules for online customer representatives are also not efficient as the company has not invested sufficiently in the project of e-learning (Mirage News, 2019). 
• The online grocery service is inefficient as majority of the staff members do not know the online ordering mechanism  (Finders, 2019).
• Due to its aggressive strategies, it is damaging the relationships with suppliers. According to Mitchell (2020), many suppliers of Woolworths reported to be unhappy with Woolworths as it asked them to mitigate 50% of the price increases. Moreover, Woolworths has recently lost its ground due to bad morale and commercial acumen while partnering up with suppliers (Mitchell, 2020).
• Recently, suppliers have been rating Aldi and Coles above Woolworth when it comes to fresh fruits and vegetable delivery. Moreover, suppliers complaint that Woolworths has been charging extra 3% to cover the marketing costs during sales while Amazon and Aldi absorbs the losses on sales in its own profit margin (Battersby, 2017).