Challenges Faced By Woolworths Group South Africa

Question:

Discuss about the Challenges faced by Woolworths Group limited.

The report deals with the Woolworths Group limited an Australia based organisation that is listed under ASX (Australian securities exchange). It is one of the top 100 companies listed under ASX (Asx 2018). In Australia the Woolworths Group limited own supermarkets named as “Woolworths supermarkets”. It was founded in 1924 and currently it accounts to eighty per cent of the Australian market (Woolworths Ltd 2018). It operates as food and liquor merchandise retailer. The products offered by the company are packaged food, vegetables, fruits, magazines, beauty products, baby products, pet supplies and other household products. Woolworth is also available currently as online shopping portal and there are more than 1000 stores in the country (Woolworthsgroup.com.au 2018). The aim of the report is to highlight the current challenges faced by the organisation and managerial implications. The purpose is to apply the theoretical knowledge in resolving the real world business issue. The report involves collection of secondary data in this context and analyse the marketing and communication approaches to suggest appropriate situations.   

The aim of the research is to learn the current business problem of Woolworths and analyse approaches taken by the organisation.

The objective of the research are-

• To identify the business problem of Woolworths Group limited
• Analyse the problem using the integrated marketing communication approaches of Woolworths
• Recommend effective solutions to resolve the business issue  

The methodology used for the research is qualitative study.  Literature review is used for collecting the secondary data. It is the tool to gain current knowledge on the chosen topic along with   substantive findings, theoretical and methodological contributions (Neuman and Robson 2014). For this purpose the, review of books, journal articles, and news articles will be conducted.

The key terms used for the literature search are, “Woolworths Group limited”, “business issue Woolworths”, “Woolworth’s challenges”, and “integrated marketing communication Woolworths” and “IMC Woolworths”. Boolean operators such as OR and AND are used for effective research in database. The inclusion criteria for the literature review are papers and news articles published in English, in between 2012-2018 and on Woolworths Australia. Australian based journals are used for this purpose.  The rationale for choosing the range of the date is the availability of the significant data in this period and chance of obtaining bulk of data. Since recent challenges of the organisation may not be available in journal articles, the news articles are also considered. Before proceeding with the journal articles, the relevance of each of them is scrutinised by review of its abstract, full text followed by its references.

Market Position and Challenges Faced

The current business problem faced by Woolworths is the slow consumer cycle and slowing growth in the market. It led to shift of the consumer focus towards fresh foods and broader grocery categories, which does not appear to be optimistic (Janda 2018). It is due to lack of product innovation and creativity, the company is not able to communicate with the stakeholders. The customers are unsatisfied (HA Bijmolt et al. 2014). There is clearly lack of integration of marketing communication strategies at different levels of management (Ellis and Waller 2017).

For the last two years, the grocery has been challenging for Woolworth as the company has not communicated with variety of target audiences (Pulker et al. 2018). Further, there has been less volume growth (InsideFMCG 2018). Since, last two years there is no improvement in the stock loss rates. There is the slowing market growth observed with lack of robust marketing and communication strategies (Kurnia et al. 2015). According to Irvine and Moerman (2017), the growing challenges have led the organisation to reduce the price of shares from $30 to $27. As per the analysts, the margins appear to shrink in the key Australian Food and Liquor division (Gilbert, Stafford and Sehgal 2016). As per Knox (2015), there is an increasing pressure building on the margins due to increasing competition from the Coles and Aldi. There is an increase in pressure to look outside the Australian food and liquor business. The multiple pressures on earning is evident from the cut on the earnings per share by 2% and 3% in financial year 2015 and 2016 (Janda, 2018).

Integrated marketing communication or IMC is an approach to plan business communications that yields profitable results. It is possible by reducing the marketing costs and intense campaigns. Different components of IMC are sales promotion, sponsorship, advertisements, public relations, product placemats, online marketing and direct marketing (Barker 2012).

Analysing the 4 Ps marketing mix concept, promotion is one of the P. Promotions can be successful using different mix off communication tools, provided they work in harmony. A maximum communication impact can be achieved by integrating tools such as direct mail, sales promotions, advertisements, telemarketing, and use of social media. It helps maintain the clarity with the stakeholders (Armstrong et al. 2014). According to Grimmer (2017) Woolworth takes approach of too many stock-outs.  The company is investing huge amount of money in advertisements. The primary component of the marketing mix is advertisement as it helps reach the mass target. It has invested money in various loyalty schemes, such as petrol pump discounts. It uses intense campaign methods such as Fresh Food People campaign (1987-2012). Other methods are use of online media for extensive promotions, magazines, and promotion through newsletters. The company ensures lucrative discounts, and extensive deals, and also promote through gift cards and celebrities. It has been successful in attracting huge crowd by online stores. Target segment is reached by extensive promotional channel. Further, its presence in the market has increased through physical evidence such as billboards and hoardings and distribution of bags with its name and logo in the shop. These strategies have markedly increased the sales and popularity of the food and liquor product.

Marketing and Communication Approaches

Analysing the Woolworth’s promotional strategy as a part of marketing mix, several key issues were identified. There is lack of integration in the head office. In Woolworths, there is confusion in regards to allocating price investment between promotion and everyday low prices. As a consequence, the supply chain department and the procurement are not well connected with the marketing department. Considering the present crisis, its supply chain is not focusing on efficiency and cost cutting to reduce unnecessary expenses. Currently it is not having the strong supply chain support. This outcome is surprising despite heavy investment in the different advertising streams starting from television ads to lucrative discounts. Thus, the brand image is lowering and shift in customer focus. The company has not taken steps for promotional uplift or buy additional products which indicate overlooking the IMC principles (Fernie, Fernie and Moore 2015).

IMC also requires innovation and accountability integration. This approach was used by the Woolworths and was evident from the announcement made by CEO in 2016 to recapture the innovation and customer focus. The company intrinsically focused on its resources and has also invested 150million dollars to overcome the grocery challenges. However, even after one year the strategy did not lead to increase in growth in the Australian market. There is no focus on the product innovation since last two years (Methner et al. 2015). Focusing on the customer contact and single voice relationships consist one of the distinguishing feature of IMC (Yeshin 2012). On relating the same with Woolworth it was found that the premium customers were not interested in the discounts. They were interested in convenience and were major part of the “Sunday Convenience consumer base” (InsideFMCG 2018). However, Woolworths focused more on the everyday customers rather than the premium ones.  Both the above drawbacks can be considered the cause of slow consumer cycle and slow market growth rate of Woolworths. Communications were not wrapped around the buying process of the customers. It consequently hampered the brand values and client relationships. There is a decreasing market power of the company with the increasing competition. The company is failing in innovation and sustain its differentiated image of quality (Bowles et al. 2016).  There is a need of company to focus more on branding and marketing although it had earlier created an image of healthy product range.    

Upon analysing the online marketing approach of Woolworth as a part of IMC, it can be said that online shopping service seems to be incompetent and is diverting the customer’s attention to other competitor’s products. The technological factors need to be improved. There has been an instance where the customer has paid the bill via credit card and the company could not deliver the desired product. Therefore, online marketing should be more innovative to enhance the customer retention (Humayun 2016).

Managerial Implications

Analysing the above approaches of Woolworths indicate managerial implications. Managers must emphasise on integration during creative sessions and annual reviews. It implies for the managers to ensure that the different members from advertising, marketing, sales promotions are integrating their messages. This process requires good internal marketing. The managers must ensure crystal clear communication strategy linking core values of the organisation to add brand value (Yeshin 2012).

Applying the innovation adoption model, it is recommended for the company to spend a huge part of promotional expenses on consumers to share information on products. It can boost sales by introducing new products and attracting new customers for purchase, by creating cohesive brand. It is advised to promote using celebrities for premium label products. Since the quality of the products offered by the organization is same as that of its competitors, it must focus more on campaigns such as, “Always at Woolworths”, and “iconic Fresh Food People campaign”. New campaign can be on “drop in product prices” (Yeshin 2012). In addition to the better convenience, the company must focus on superior freshness of the products. It will prevent the customers to focus on competitor’s products.  The company must continue to deliver the liquor growth by giving innovative offers for every occasion. Innovation and customer’s trust will help the company gain the sustainable sales momentum and increase the growth (Keith 2012).  The company must invest highly for promoting through mobile apps, websites with pages for different products and categories, and virtual stores to promote its presence among new customers. A regular redesign of websites during occasions such special buys, Father’s day or special offer week will help retain customer focus and beat the competition.  The websites use more significant potential keywords to increase traffic to site. As per the Ansoff’s matrix, product development or generating more modified products would beneficial in current situation. It will increase the market penetration (Methner et al. 2015).

The company has been focusing on lean retail model to sustain competition in new market since 2015. It is recommended to increase the cost saving initiatives to increase the customer experience in the non customer-facing areas. There is a need of strong focus on the   capital management for growth. It is suggested to increase the investment in the online pricing system, online marketing and collection points to increase the multi-channel customer experiences (Spillan and Ling 2015). It can develop the current market by branding and extensive advertisement campaigns and through Facebook, Instagram and other social media platform. This platform is easy way to help existing customers to invite new people, allow people to post photos of stores or create funny hashtags on Instagram. Social media campaign is easy way to inform customers about new products now available at stores and keep engaging them by directing to product survey forms (Keith 2012).

Applying the information processing model, it is suggested to motivate consumers by providing information that will influence their purchasing decisions. Telemarketing would be more effective then personal selling and advertising (Batra and Keller 2016). Guerrilla marketing involving low cost tactics and innovation would give memorable experienced to the customers. Like ALDI it can engage in email marketing for featuring new products on occasions such as mother’s day or offers on chocolates during festival (Leibold and Hugo 2015). Applying the financial and strategic integration as a part of the four stage of model IMC, the company must focus on low profit margin. Only by revising the pricing strategy, the company can target the large segment of the market as it is the capital intensive industry (Kitchen and Burgmann 2015). Changing the pricing and the range strategy may neutralise the Coles and Aldi’s impact on Woolworth’s sales. The company’s pricing strategy should be changed to accommodate the customer’s needs, brand awareness and gain cost advantage (Fernie and Sparks 2014). Using technology integration as a part of this model, the company must use database to track the customer response to emails or social media updates can help effective IMC. It can design attractive homepage on mobile like Aldi to increase visitors. This approach will help in collecting and sharing vital information related to customers throughout the buying life (Kumar and Reinartz 2012). 

Conclusion

The report is the outcome of the current challenge of Woolworth. It has been ranked one of the most popular retailing industries. However, recently, the challenges faced by Woolworths are the slowing consumer cycle and market growth due to defective IMC approaches. For the last two years, the grocery has been challenging for Woolworth and a slowing market growth observed. The IMC strategies need to be modified as the recent downturn is due to ineffective integration of the marketing and communication tools in different level of management. The company must come up with innovative and competitive strategy to sustain it competitive position. It is recommended to focus more on the product development using innovation model, information processing model, marketing and promotion, capital management, strong supply chain support, financial and strategic integration, technological integration, and lean retail model

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