[QUOTE=phoenixinoz]No one is saying there is a conspiracy to not allow any competition.
QUOTE]

I am!

I love conspiracy theories!!

No seriously - I just can't understand it. In a country where land prices are a fraction of the UK, where labour prices are on a par, where the market is substantial and not dispersed, where fuel prices are a fraction of the UK, where one of the cheapest manufacturing regions in the world (SE Asia and China) is on the doorstep, at a time when the Australian dollar is strong, why are grocery prices equivalent or higher than the UK?

You can see Mrs D, why conspiracy theories develop given the above.

And knowing Tesco's like I do,they will gain entry into the market as soon as it looks like a viable option.

There are lots of things different about Australia Vs UK and all pose a potential problem / learning curve which incurs massive expense hence extensive entry costs into the market - for example
1. Employee law is different and has implications re working time directives
2. Climate / refridgeration / storage / product lifecycle varies from UK product
3. This requires different storage, handling, distribution than in UK
4. Skilled / unskilled workforce required [are these available?]

Unfortunatley not a dream....more of a nightmare cos the populations are spread out across the whole country so in effect either have to be transportd via rail train, road or ship all of which add massive amounts of cost. Also because some areas use either / or distribution methods, then the new company can't even set up their own distribution network so they will rely on 3rd party costs to deliver for them i.e all adding extra costs to the bottom line. That is of course, unless the new company can afford to buy it's own rail, road or shipping network...lol[kidding ]The reality is Aus is spead out and the populations in those areas are not big enough to warrent various "satellite" networks unless of course they can guarantee most of the market share to offset the cost. And we all know that aint gonna happen as it takes time to build up a market share. So unless there are massive population increase then it may not be worth it just yet...although if ever there is the opportunity then no doubt the likes of Tesco's will muscle in there..no doubt about that..

See that's the problem. It's a vicious circle. Tesco would have to differentiate either their product and / or price [like Aldi] or they would end up being the same as the two current market leaders, and yet if they lower their price then their operating costs increase [they wouldnt make as much margin] so they'd have to sell more and this wouldnt be guaranteed, and then simultaneously their operating costs would be massive cos they have just entered the market. The other thing is, they may find they cannot afford to sell cheaper as the suppliers margin may not allow, afterall...a supplier may prefer to deal with woolies/coles as they offer more for the product.So in effect it's not always easy to sell it cheaper cos at the end f the day there are still costs to be paid. Ohhh and another thing, to get the right skills you would almost certainly want Aussie people at exec level to kick start the business and hit the ground running [familiar with the market] and to get these you would be competing with Coles/Woolies to in effect pinch their staff, and this would also incur great cost as you'd have to offer a better salary scale or at least match the others, and all this on margins that are less cos you're selling things cheaper? [your proposal]...so it aint gonna happen is it? So as you can see it's a double edged sword.


Ummmmm I reckon if you talked to a Markateer they'd tell you differently. Tesco's is very well known in UK but it's an unknown quantity in Aus and to the Australian market and to compete with the big boys they would have to spend a substantial amount of their annual operating cost to inform potential customers what it is they have to offer. Then there are different marketing channels e.g.newspapers,brochures,TVadverts blah,blah...and then there are the regional variances i.e they "tap into" the various socioeconomic areas in a very different way. Marketing is a bigger skill than sending out a few brochures and the costs are astronomical. To give you an idea, I was involved in a JV with a very large organisation in UK [funnily enough ]and the inital start up costs for Marketing equated to 50% of all costs. It was a serious amount of money.....and much more than I realised at the time as this company was already well known

I don't think it's a case of anyone else being unwilling to enter the market, I see [for all the reasons mentioned] it's a case of it not yet being a viable option. At the end of the day if a competitor wants to enter the market they have to work out if it's viable i.e payback and inevitable loss /risk etc....and until such time then they will stand clear and leave it to the current leaders. As for Aussie prices being good. Not sure about that cos don't know enough about the operating costs or profit made. In fact I'm not sure if a monopolies and mergers comission exists here [would have thought they did] but the dodgy thing in my view is that the prices are almost the same, there doesn't seem to be genuine competition and these players also operate in the discounted food niche market too, so have pretty much cornered the market from all angles. And this is what smacks of cartel behaviour

Why would a government govern against what suits them? The only reason the UK now semi conform is because the European Union in effect police's from beyone the UK gates. And even then, money still talks. It's a fact of life and at the end of the day it is all about money. If someone else can come in and it's a viable option then they will. In the meantime, no government is going to help them as this would probably incur them bailing the newby out until they get their feet on the ground....and at the end of the day, the government want money coming IN.....not handing it OUT

Oh dear....sorry about the essay again. Couldn't think how else to explain it

Actually I think Aldi have got their heads screwed on in a lot of ways.

They have chosen a differentiated market i.e fairly average / good quality discounted food [although no variety]and at a low price. They also store product in the stores cheaply so low operating costs so higher margins to help them in terms of entering the market. Although I've no doubt they are doing this for a set amount of time at a loss.

I think they have realised that Aus has got to grow in terms of population and they want to be in the market at the beginning to suit a certain niche market i.e discount food competing with the Bilo type stores [owned by the leaders].

A comment you made re Aldi "not being the norm" is actually a great one...and in fact backs up what I said earleir about marketing in Aus being difficult and therefore costly.

Any new company entering Aus will spend a substantial amount of money marketing their product and convincing the consumer that their product is what they want as an alternative to the Coles / Woolies. And indeed the same is happening here as what occured in UK trials.

Initially the UK market thought Aldi was a crappy store with not much variety however over time their stores have served people who have less disposable income, who want a fairly good quality / low cost shop and who are not bothered about the variety. And it is for this reason Aldi has taken off substantially in some areas in Uk.

The hardest marketing issue is to convince people to defect from the big supermarkets and this takes years. I suspect Aldi will have the same approach in Aus and again the consumers will get used to Aldi as an alternative to the big players.

[QUOTE=NKSK version 2] Aus population is circa 60 million spread across a country 52 times bigger than UK.

UK has circa 70 million spread accross a country 52 times smaller than Aus

This means more compact population in UK so cheaper operating and entry costs [economies of scale].

Distribution in UK is generally by road [can distribute from one end of country to the other in a day] This also means these companies generally can afford their own distribution network so efficient and cost effective.

Distribution in Aus is by road, rail and sea as some areas not viable via road only [product can take more than a day to deliver and also costs involved as it's such a big country]. This therefore menas companies generally can't afford a comprehensive distribution network [they might own trucks, but not trains or ships]...hence less efficient and less cost effective distribution network. This is perhaps why some of the food is on a par cost wise to UK.

Perhaps some consideration should be given to Walmarts modus operandi in the USA. They are equally spread out acroos a vast country and have managed to become the major player. If Walmart can make vast profits in the USA then making a profit in Aus should be a doodle to my way of thoughts. The existing players are relatively small by international standards and if one ever develops a weakness then a major international player will pounce - provided the National government allows it. Surely it will happen at some stage in the business cycle and then the market will begin to open up. I dont profess to know the ownership structure of the supermarket business in Australia but the gradual internationlisation of markets will inevitably take place to some degree here. Perhaps the comments made about protected markets has for now held back the tides of change.
Blimey all this debate started from a price comparison! :scared: :scared:

That was me who could shop for 40 quid back home and im still trying to find why that was so funny. If you have seen me as a few have on the forum annorexic would not be a word used by any of them last check it was 6 foot 1 and 82kg of prime Nottingham man.

Lol.....aye...the steaks out here are bigger than that

It's all about market share, density of population, volume of population, being first to market, set up costs and competition. Aus is not a doddle in comparisson for all the reasons mentioned previously. However it's a "moveable feast" and if any of these variables alter to make entry a viable option, then sure as eggs is eggs some big company will muscle in. It's only a matter of time and finding the right "climate".

Agreed. Except one thing. The existing players have a captured market and one that will no doubt move slowly in terms of change. It's a strange thing but customers are not always ready to change even when they say they are. And to make that change/transition from the current players to the new they would have to be enticed. To do this the new company would either have to be different or cheaper and we've already mentioned those implications, so it's not as cut and dry as it seems although if the climate becomes such, then no doubt this will change.

The difficulty here to some degree is that Aus, by the very nature of its isolation, is a law unto itself. Whereas UK has close competition therefore allies and competition nearby, Aus is seperated and has to fight with the likes of Asia. It is this remotness which to some degree isolates Aus from the internationalisation you mention. I don't think its so much a protected market thats the problem, it's the fact that the population is relatively small Vs the size of the country, Vs the complexity of distribution & warehosuing Vs the potential market share. It's the monetary aspect i.e viability that's in question. Once it becomes a viable option then there is absolutley no doubt competition will move in.

As sure as eggs is eggs, the sharks are already circling the ocean

Some great points. I agree about the price similarities between the major players being the main concern.

I've just tried finding out what the real population density is in the urban areas of the eastern states - I can't get beyond the density for Australia as a whole. You see, this is my point - sure Australia is way less densely populated than the UK but 80% of the population is concentrated in the eastern states and I wonder how much of that population is in reality in very few urban centres? (giving in all practicalities, a relatively high population density)

Karma on its way for the arguments!

[QUOTE=phoenixinoz] Blimey! The Aussies are breeding a lot faster than I imagined! (The *Official* population broke 20m last November, I believe)

Take your point about rad and rail distribution. but as people have said, the 20m are very concentrated in about seven or eight relatively small areas an ideal situation for the likes of Tesco.

As for startup costs, Tesco have successfully gained a significant presence in Asia and Eastern Europe - a far bigger challenge than Oz, I would think, given the cultural makeup here. And Tesco is I think the only player to have made a profit on their home delivery internet market: Oz capital cities would be ideal with their demographics and would-be cafe society.

and finally the lettuce myth is busted

Ooops....apologies...you are right Roger. The population in Aus is 20m...God knows where my fig came from...lol [Tia Maria talk last night ]


And thats the whole point. Look at the potential market share of these countries

It's worth remembering UK is a small and highly populated country and Tesco's have got good coverage so it's not hard for them to gain economies of scale and improve on operating costs. This would be a very very different story in Aus for all the reasons mentioned before.....and added to this the population is such that a cut of 20m between the three big players is peanuts given the cost of gaining that market share.


Not sure what you mean by this Rog?

NSKV2...cheers for the karma

How sad am I that I get excited about this stuff eh...I'm your regular business anorak

Ahhhh my favourite little vegimite kid

Will PM you m8

PS. Lettuce $1.45 here

I was thinking that

Aye...but to be fair...lettuce is cheap at the mo


Wicked

Don't start that again ....