This is Woolworths' plan to regain the trust of customers and get them back in the aisles

Woolworths Sydney. Photo: Getty Images

Woolworths calls it the The Lean Retail model, a plan to gain customer trust and build sales at its supermarkets.

The first task is to get rid of another 400 jobs, on top of 400 last year, and to take $500 million in costs out of the business.

CEO Grant O’Brien says the money will be re-invested to build what he calls a “multi‐faceted and seamless offer” to customers. It’s all about price and product choice.

Both Woolworths and Coles, with a combined 60% of the market, have been cutting prices on shelves to meet renewed competition.

Average prices on Woolworths supermarket shelves fell 2.4% in the March quarter. Coles also reported lower prices but not as much as Woolworths. Prices of goods on the shelves at Coles supermarkets fell 1% over the same period.

According to market analysts German chain Aldi is about to compete more directly with Coles and Woolworths.

The other key problem faced by Woolworths, say analysts, is that its customers have been adding fewer items to their shopping baskets as they walk the aisles.

Woolworths, in outlining its new strategy today, has its eyes firmly on competitors. A new pricing strategy will be implemented to “neutralise Coles and contain Aldi’s impact”, through targeted customer offers, better stocked shelves and an improved loyalty system.  

Also expect more of the Woolworths Own Brands on shelves. It says it will create higher quality and better priced Own Brands to close gaps where no branded alternative exists.  

Part of the plan is to increase the number of Click & Collect centres, for online ordering and local pickup.

And the range of ready‐to‐cook and ready‐to‐heat meals will be increased through a new partnership with Western Sydney-based food manufacturer Beak & Johnston.

The look and feel of the stores will also change. The refurbish program will be accelerated to 80 plus stores a year compared with 23 stores in 2014 and 61 in 2015.

“Price is of course a key driver, and we will invest in ensuring we will not be beaten on price, but our customers also now expect greater use of technology and innovative offers to make their shopping easier and more enjoyable,” says O’Brien.

O’Brien, who runs a business with 3,699 stores, has identified six challenges:

O’Brien says Woolworths has productivity and growth opportunities not available to its competitors, including cross‐business scale, logistics and customer service platforms and sharing of innovation and best practice across divisions.

“We are building a set of world‐leading cross‐business supply chains and integrated merchandising systems to create competitive advantage for all businesses,” he says.

“Woolworths is leveraging unique data assets to drive new insights and competitive advantage not available to other retailers.”

Around 250 new Click & Collect locations will be added over the next two years, taking the network to 1,000 stores.

The company structure has been streamlined to bring Australian and New Zealand supermarkets into one division, to be called Woolworths Food Group.

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