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Intense competition among supermarkets continues, but lower prices have helped Woolworths reverse its losing streak, according to IBISWorld.

 

The Q4 Checkout Update by IBISWorld shows Woolworths’ average prices declining by 2.1 per cent in 2016-17, which helped it to boost its market share for the first time in several years.

 

This trend is expected to continue in 2017-18, with the retailer projected to grow to account for 36.8 per cent of the industry,’ said Nathan Cloutman, IBISWorld Senior Industry Analyst.

 

Coles’ performance in 2016-17 was one of its weakest in several years, according to IBISWorld, losing market share for the first time in several years to 30.9 per cent, due to a more buoyant Woolworths and an expanding ALDI over the period.

 

"The nation’s second largest grocer is likely to invest strongly in prices in 2017-18, which should see its market share remain relatively stable," Cloutman predicted.

 

ALDI is continuing to expand its store network in WA and SA, while upgrading its stores along the eastern seaboard to include a larger range of fresh food items. This expansion is expected to boost the company’s market share to 8.6 per cent in 2017, ensuring it retains its position as the industry’s third largest operator.

 

Individual operators that operate under the Metcash network of stores, such as IGA, have collectively suffered declining revenue in 2016-17, due to the price war between the majors, and the expansion of ALDI, Cloutman said.

 

IBISWorld predicts the struggles will continue with the market share of these smaller retailers declining to 7.5 per cent in 2017-18.

 

Overall, IBISWorld said the industry saw declining revenue in 2016-17 on the back of stronger price competition, but the researcher expects the industry to recover and grow by 1.0 per cent in 2017-18, to total $101.1 billion.

 

IBISWorld also predicted that the major supermarkets would continue to replace branded products with private-label alternatives as a way of driving demand and minimising the effect on profitability.

 

Also, the imminent entry of AmazonFresh would also make online sales increasingly important in the supermarkets and grocery stores industry, and IBISWorld said it expects revenue in the online grocery sales industry to grow at an annualised 12.4 per cent over the next five years.

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