How to fix Woolworths: what the overpaid executives won’t find in their spreadsheets

wooliesAustralia’s biggest retailer, supermarket group Woolworths, is floundering.

It’s share price and market value is down almost 30 per cent since April last year, sales are stagnating and profits are forecast to fall 35 per cent over the six months to December.

The Woolworths business is in a mess, while its competitors Coles and Aldi continue to perform strongly and steal market share.

No doubt, Woolworths is spending millions on expensive reviews and turning to its overpaid executives for answers. But I think – judging by their latest announcement – they have probably missed the point entirely.

Scouring the seven page ASX release, I found plenty of the usual management jargon like “customer metrics” and “change programs” but not a single mention of the word “quality”.

As a regular Woolworths shopper, this says a lot, but is hardly surprising.

We buy most of our groceries at Woolworths, not out of any sense of loyalty or because we like shopping there, but simply because its convenient – there is a grocery store literally up the road from our house.

When we have the time, we prefer shopping at a nearby supermarket extravaganza called La Manna, with its funky cafe, ice-cream and dessert bars and amazing selection of fresh and exotic produce.

Indeed, the demise of Woolworths is a perfect example of having too much market power and becoming utterley complacent.

  1. The real problem is quality.

My biggest gripe is with the many crappy products sold in my local Woolworths. Often they are dressed up as bargains, but what they really are, are over-priced duds.

Many people may have laughed at the story about the Woolworths scissors that needed a pair of scissors to open the packet but  that’s just the top of the iceberg I reckon.

There were a lot of mandarin pips. A lot!

There were a lot of mandarin pips. A lot!

From the packet of mandarins I bought recently infested with so many pips they were inedible to the book-reading light I returned three times because it didn’t work, my general feeling is that finding savings, rather than providing quality products is the overriding motto at Woolies.

Not surprising “value perception” rather than “real quality” is considered a key customer metric in the latest bit of corporate spin.

  1. Stop confusing customers


I have been caught out on many occasions thinking I have bought a discounted item only to pay more at the till. This is because price labels often don’t relate to the items above them. I am certain this is a deliberate strategy. Another one is promoting items with bright labels, when there is no discount. This is highly annoying. And cutting the price by 10 or 20 cents on an item is just an insult to shoppers.

3. Keep stores properly stocked

Perhaps I am being pedantic, but I am always a bit gob smacked when I stroll up and down the aisles only to find the store has run out of such staples as skim milk and brown rice. How is this possible for a company with access to the best supply chain technology and automated ordering software in the world?

4. Make shopping a bit more interesting.

If only Woolies were a bit more like Aldi...

If only Woolies were a bit more like Aldi…

Woolworths could learn a thing or two from German supermarket giant Aldi, which mixes up the standard grocery items with strange and exotic products that change from week to week. You never know what you will find in an Aldi, but in Woolworths its the same boring stuff, week in and week out.

5. The new rewards program sucks

Woolworths new rewards program is a badly thought out idea and feels like a bit of a fraud. The newly introduced scheme does not pay out loyalty discounts on items immediately as it did in the past. Instead you accumulate them on your rewards card until they reach a certain value.

So instead of immediately getting a bit of reduction in your bill, you have to make multiple visits to the store to get anything back. Whichever marketing genius came up with this idea, should be sacked or at least forced to eat some of those pip-infested mandarins.

So, those are just a couple of ideas for whoever replaces Grant O’Brien as Woolworths CEO.

And here’s another tip for those overpaid Woolies executives. Forget the high-powered meetings, power point presentations and slick marketing campaigns. Get out of your wood-panelled boardrooms and take a stroll instead down some of the aisles of your supermarkets to get the real picture.

And stop and have a word with some of your shoppers, you might learn a thing or two.

Note: I have made changes to this story. The original version made comments about my local Woolworths supermarket staff. This was wrong and I apologise. The problem is with its management.

Loyalty programs: 11 years to shop my way to an ipad

loyaltyThe small lady behind the counter scowls when ever I order a coffee and give her my loyalty card to mark.

I’ve not yet seen her smile, perhaps she is incapable.

She doesn’t have a stamp, as most cafes do, but scribbles a signature in Chinese characters over one of the eight oval shapes that must be filled in before I get a free coffee at Coffee Kingdom (corner Market Street and Flinders Lane).

You’d think a smile might be a nice gesture since I choose her cafe among the myriad of alternatives to go to for my afternoon caffeine fix.

But no. She takes my money and signs my card like a teacher marking the report card of one of her least pleasing students.

I can only wonder how she is going to react when I fill in all the eight spaces and give her my card instead of money and ask for a skinny cappucino.

Will she spit in my coffee when I am not looking? Will she burn the milk? Will the coffee cup be only half full?

All this has got me thinking about loyalty programs.

A couple of years ago, I racked up enough points on my Virgin velocity card to buy an 80 GB ipod classic. It was pretty much top of the range back then – I still have it and use it often – and I was pleased with myself for having bought it for “nothing”.

But of course that’s not the case at all.

I first had to rack up a couple of year’s worth of trips to and from Sydney, a couple of overseas trips to London and back and one or two to Johannesburg and back – all on Virgin to get enough points to buy the gadget.

A while back I thought about writing a blog post about how much shopping I would have to do at Coles to qualify for say an ipad on the Flybuys loyalty program.

On Coles’ Flybuys program I need 113,800 points to buy an ipad 2 with wi-fi and 3G capabilities.rewards

Currently, after a couple of years of grocery shopping ( I don’t do all my shopping at Coles I confess) I have a whopping 5,700 points, which qualifies me for two movie tickets at Hoyts (worth about $40) with a few points to spare or just enough for a six month subscription to the ABC’s Gardening magazine.

So after years and many thousands of dollars spent on groceries, pet food and lately, nappies, I can cash it all in and go to the movies or subscribe to a magazine.

But what about that cherished ipad?

Flybuys does provide a calculator so I can estimate just how much I need to spend at Coles or Kmart or Liquorland to put in my order.

If I were to spend $100 per week on groceries at Coles, this would gives me 400 points. And lets say I spend $50 a week on average at Target (200 points) and $50 on booze at Liquorland (200 points) I’d rack up 800 points a month.

Divide that by 113,800  (minus the 5,700 points I already have accrued) and I get 135 months or just over 11 years.

More than a decade of loyal spending!

Of course in 11 years time, the ipad will probably be replaced by a device implanted behind the eyeballs operated by thoughts and god only knows how many points you’ll need for that.

(Ok, I’ve been watching too many sci-fi movies, but I do believe the next Samsung smartphone will have “eye-scrolling” technology)

The bottom line is that most loyaltly programs throw scraps at loyal customers in return for valuable information about spending patterns and the type of products we might like to buy.

Consider this. I got an email from Flybuys today offering me a bonus 200 points if I shop at the Coles kosher range before passover.

Now, I don’t imagine that catholic priests that do their shopping at Coles – and have never once bought  a kosher chicken at four times the price of a non-kosher one  – will have received this offer.

And I know why I got it.

I’ve only once ever shopped at Coles for kosher food. My mother came to visit last year from South Africa and we bought a kosher chicken and a few other things to prepare a traditional Friday night shabbat dinner.

Of course I duly swiped my Flybuys card and surprise, surprise – I’m on the kosher mail out along with all the regular kosher buyers from Bentleigh and Caufield.

(They must have ignored the bacon, hot cross buns and shaved ham I’ve bought in the past).

Shabbat Shalom indeed!

I should add that loyalty programs are brilliant if someone else is picking up the cheque but you score the points – such as businessmen who fly regularly on the company credit card. I think of the movie “Up in the air” and George Clooney receiving his special graphite loyalty card for racking up a 10 million air miles.

On a smaller scale, I could offer to get the coffee round at work and earn a free coffee everyday at Coffee Kingdom.

Imagine the look on her face!