A RETAIL expert says Woolies’ supermarket war with Coles and its failing Masters stores is the root of its spectacular Big W’s fall in fortunes.
Woolworths Group chief executive Brad Banducci admitted this week it could take years for the company to turn around Big W’s fortunes.
His comments come after new figures show Big W’s sales have dropped by 9 per cent for the third quarter.
Mr Banducci admitted Big W remained a “work in progress” for Woolworths.
But Retail Doctor Group chief executive Brian Walker told news.com.au Big W had simply become less relevant, while its retail rival Kmart had managed to stay modern.
WHY IS BIG W SUFFERING?
Mr Walker said he was not surprised by Big W’s sales decline.
“The trading environment for discount department stores is tough. Kmart had a wonderful turnaround and became Australia’s most profitable discount store while Big W and Target have definitely declined,” he said.
“There’s a range of factors why that happened, online is playing a part on a small degree but there’s a similarity between the discount department stores’ offerings, between Big W, Target and Kmart.
“It’s a $12 billion sector and as a consequence, customers have no great differentiation between them.”
Mr Walker said international players like Uniqlo and German retail giant Kaufland, which is planning to make roots in Australia, were making the discount department market even more competitive.
Woolworths Group’s third quarter sales also shows summer stock failed to sell at Big W so it had to be heavily discounted before new season lines came in.
IS BIG W THE NEXT MASTERS?
The Woolworths Group suffered a massive blow when it had to shut down its Masters Home Improvement stores.
Experts had speculated Big W will be the next to go but Mr Walker said the discount department store still had a large revenue.
“But the thing is when we talk about Woolworths in this country and Masters and Big W and so forth, what Woolworths consistently shows us is when it is focused on supermarkets, they are exceptional and world-best and really transforming the supermarket business. But the same amount of focus has not been on Big W,” he said.
“Looking at the product mix and atmosphere in store, consumers have just responded accordingly so Big W needs to be radically transformed.”
Mr Walker said Woolworths knew it needed to change Big W, but it had been a rocky couple of years for the company.
“Woolworths has been absolutely occupied with the Masters transaction and its own supermarket performance relative to Aldi and Coles,” he said.
“They’ve had executive changes and all these new factors created the perfect storm.”
HOW WILL IT SURVIVE?
Woolworths Group’s sales report said it had reviewed Big W’s strategic plan.
“We are working hard to restore price trust with our customers, the process of which has already begun,” the report said.
Woolworths has hired a new managing director for Big W, who is expected to revive the struggling retail giant.
Big W recorded a sales dip of 8.6 per cent and Mr Walker said it was a significant drop.
But the department store is still making money, raking in $757 million in sales for the third quarter, but it’s only a small part of what the Woolworths Group is making as a whole.
In the third quarter, Woolworths Group sales increased 4.4 per cent and the company made $13.8 billion in sales.
“Big W’s 8 per cent drop is indicative of the very, very competitive environment and the struggle that Big W currently finds itself in,” Mr Walker said.
“I think it can make its way back, but perhaps not in the same shape and form as it is now. It’s really about relevance and having something that customers want. It’s not a lot more complex than that.
“Looking at what categories it is strong in and what part of the business dominates is what I would focus on.”
Mr Walker said Big W stores were often found near a Woolworths supermarket, and could use that to its advantage. While Big W fortunes had declined, Woolworths supermarkets continue to grow and blitz its rival Coles.
Mr Walker said Woolworths supermarkets and Big W department stores could trade off one another, by mixing product and price. He suggested loyalty-type programs could also draw some Woolworths supermarket customers to Big W stores.
He said Big W would also need to give itself a revamp like Kmart.
“The way Kmart does colour blocking for example makes it a more interesting environment.”
Mr Banducci said Woolworths was pleased with the progress it had made in the supermarket sector but was now focused on the opportunities the company had to further improve the business for the benefit of customers, team members, suppliers, community and shareholders.
First published news.com.au on May 4 2017