Coles Myer has bounced back in Australia’s retail market thanks to its new fuel discount, offered via an alliance with Shell. The discount, which matches that of rival Woolworths, has driven sales up by 12%, and now prospects are strong for further growth as the venture is rolled out nationwide.
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Coles Myer’s discounted gasoline offer is having a strong effect on retail sales. The company registered 12% growth in Q1 sales, with customers won away from its main rival Woolworths. In contrast Woolworths’ sales have risen at half the pace of 2002.
The offer, which provides shoppers who spend over A$30 (US$21.7) with a 4 cent per litre saving at the pump, has been running in Victoria across 150 sites so far. From 1 December, the company plans to extend this to 584 stations nationwide, starting with 200 stations across New South Wales, Canberra and Australian Capital Territories, due to be completed by mid 2004.
Coles Myer hopes to attain net income of $800m by 2006, up from $429.5m in the year ended 27 July, against sales of $27bn. Coles Myer CEO John Fletcher expects the fuel network to generate more than $3bn in fuel and convenience store sales when completed.
While this plan looks on course, based on the first 3 months, Woolworths has mounted a counterattack on Coles Myer. Woolworths has already agreed to a venture with Caltex that will give the company 450 retail outlets, and will look to further extend its 10% market share.
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By GlobalDataIn a pre-emptive strike, the first three of Woolworths’ discount service stations have been opened in New South Wales, beating Coles Myer’s 1 December deadline. Meanwhile, another rival grocer Metcash said 280 of its IGA stores in New South Wales would also offer customers cheaper fuel from Friday.
As the fuel wars gain momentum, the actions of large players like Coles Myers and Woolworths will inevitably put increasing pressure on the smaller players in a market already characterised by wafer-thin margins.
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