The Supermarket Strategy No One Understands: Why Two Woolworths Thrive Across the Street
In Napier, New Zealand, a peculiar retail reality exists: two identically branded Woolworths supermarkets operate directly across the street from each other. This isn’t a temporary situation or a rebranding glitch; it’s a decades-old anomaly that challenges conventional supermarket logic. But beyond the initial head-scratching, this case study reveals a fascinating glimpse into competitive strategy, legacy business practices, and the evolving landscape of retail dominance.
A History Rooted in Duopoly and Defensive Positioning
The story begins long before the recent rebranding from Countdown to Woolworths. As local historian Andrew Frame details, the Carlyle location originally boasted a more upscale “Big Fresh” brand, complete with memorable in-store attractions. The two stores’ shared history, and the subsequent branding convergence, highlight a long-standing duopoly between Woolworths and its competitor, Foodstuffs (owner of Pak’nSave). The presence of a Pak’nSave just 500 meters away is no coincidence. Frame argues that Woolworths maintains both locations, not out of necessity, but to prevent Foodstuffs from gaining a decisive advantage in the local market. Closing one store would open the door for a competitor to establish a stronger foothold.
Beyond Landbanking: The Real Reasons for Redundancy
Initial speculation pointed to landbanking – the practice of acquiring property for future development rather than immediate use. However, Woolworths has explicitly denied this, and New Zealand’s anti-landbanking regulations now prevent such practices. Chris Wilkinson, Managing Director of First Retail Group, explains that the situation is a “legacy issue,” inherited from a time when such competitive positioning wasn’t restricted. Today, keeping both sites makes strategic sense, not because of potential property value, but because of the broader retail environment.
The Expanding Definition of Retail Competition
Wilkinson points to a crucial shift in the retail landscape. Supermarkets are no longer solely competing with each other for grocery sales. They’re increasingly vying for share of wallet against a wider range of retailers. Pharmacies, hardware stores like Mitre 10, and even Chemist Warehouse are expanding their product offerings to include items traditionally found in supermarkets – dishwashing liquid, cleaning supplies, and more. Maintaining a strong presence, even with some overlap, ensures Woolworths captures a larger portion of consumer spending.
A Glimpse into Future Retail Strategies
The Napier Woolworths situation isn’t just a historical quirk; it’s a potential preview of future retail tactics. As competition intensifies and category boundaries blur, we can expect to see more instances of seemingly redundant store locations. Retailers may prioritize maintaining market share and preventing competitor gains over maximizing individual store profitability. This is particularly true in densely populated urban areas where real estate is at a premium.
This trend extends beyond supermarkets. Consider the proliferation of coffee shops on the same block, or clothing stores offering similar styles. The goal isn’t always to capture 100% of every customer; it’s to ensure they remain within the brand’s ecosystem. This is a shift from a purely transactional model to a relationship-based one, where convenience and brand loyalty are paramount.
The Rise of ‘Defensive Retail’ and its Implications
We’re entering an era of “defensive retail,” where companies prioritize protecting their existing market share over aggressive expansion. This is driven by several factors, including rising operating costs, increased competition from online retailers, and a more cautious economic outlook. The Napier Woolworths are a tangible example of this strategy in action. It’s a calculated move to maintain control, even if it means sacrificing some short-term efficiency.
This defensive posture also has implications for consumers. While having multiple options might seem beneficial, it could also lead to less investment in innovation and lower prices. Without the pressure of a truly competitive market, retailers may be less inclined to offer significant discounts or develop groundbreaking new products. The Commerce Commission’s ongoing scrutiny of the New Zealand grocery sector, as highlighted in their Grocery Sector Regulation reports, underscores the importance of maintaining a healthy level of competition.
What are your predictions for the future of supermarket competition? Share your thoughts in the comments below!
