Supermarket trolley market share

NEED: This has been one of the more unusual market analysis requests. A client had a product that they believe could revolutionize the shopping trolley market, but they had no idea about the size or dynamics of the market.

This may seem at odds to the marketing promise of ‘finding a need and then making a product or service to meet that need’. Although in recently technology developments in materials, internet and general communications connectivity has meant that there are a lot more solutions out there looking to solve problems. 

ACTION: If you research this topic, you will readily find that no company is willing to provide details about how many trolleys exist in their supermarkets. This is because they believe that it will provide confidential information that their competitors can use. Curious as this is, in the end it didn’t matter as much as knowing who the major trolley owners were (retail businesses), how many stores these chains looked after, and creating a proxy from independent sources as to how many trolleys on average each store may contain.

If you want to build a better trolley, just like a better mouse trap, you will need to understand the lifecycle costs of the different trolleys and how the client’s product or service will affect those costs. Obviously their product must create a large differentiated advantage over any other offerings for any large player to trial using a new product/ service.

Primary research was also required on council depots (where trolleys go to die) and on the distribution of the trolleys – who owns how many and where. It also needed to be determined if there was a real problem that needed solving and how much would anyone pay for a solution. Will they require bulk discounts and how will the client’s business model satisfy these tight criteria while making a profit?

RESULTS:  Extensive primary (personally collected) and secondary research was required during which the ‘pain points’ of the potential customers were defined.

Segments from report:

Coles and Woolworths supermarkets maintain between 60 and 80% of supermarket retail sales – depending on if you are measuring by revenue or store size, or specific sale category. A 2008 report by the ACCC estimates that the two major supermarket chains (MSCs) account for around 87 per cent of stores above 2000 m² and around 96 per cent of stores above 3000 m².

Supermarket market share for stores with areas over 2000 m² (ref ACCC)
 

Second tier supermarket chains comprise a significant number of supermarkets, however many like IGA, operate independent / franchise operations. Unlike the largest chains keeping a clean fully stocked fleet is more critical for these smaller operators. It seems that fiscally, large operators are not as concerned about councils impounding trolleys as they typically use low cost trolleys that can cost more to retrieve (pay fines and perform maintenance) than to replace. They also have large fleets that mean they only need third party contractors to search three times a week. These low cost trolley collection services are not time critical and can lead to higher rates of trolley vandalism.

Second and third tier supermarket chains/ independents often use higher quality trolleys, have a smaller fleet and need the bulk of that fleet available all of the time. Many councils are tackling methods to remove abandoned trolleys more quickly ranging from fining consumers, increasing fines to supermarkets and report hotlines. However the most punitive measure of fining these companies appears to be non-binding and leaving councils with issues about how to dispose of trolleys that supermarkets choose not to retrieve.The total large player shopping trolley market is estimated at a minimum of 610,000 trolleys. This uses conservative trolley numbers for supermarkets over 1000 m² and excludes any trolley numbers for supermarkets under 1,000 m2 or any liquor outlets, Dick Smith, Tandy, Bunnings, Office works etc.

 Supermarket share of grocery sales by state

Estimate of trolley market size

An ACCC report states that “there Are approximately 2,400 supermarkets of about 1000 m² or greater currently operating in Australia. Calculation estimate methods used below are confidential.

Data limitations

• Excluding any trolley numbers for supermarkets under 1,000 m2 and liquor outlets, Dick Smith, Tandy, Bunnings, Office works etc
• From the above calculations it is estimated that the large player (1,000 m² +, shopping area) shopping trolley market has a minimum of 610,000 trolleys.

CONCLUSIONS

This market segment is a true oligopoly, dominated by Coles and Woolworths. As they have the bulk of store sales and trolleys, they have a high concentration of power and may be considered to be price setters, rather than price takers or 'fair' negotiators. However with the knowledge of trolley cost, pain points and total market distribution my client is now in a much better situation to understand development costs and what business model may work best in this market. It may also help them understand that they need to commit more resources to develop other markets because unless they get large volumes sales, slim margins are likely to recoup relatively low end profits. In this case while the sale is unlikely to be a loss leader, it will in the least prove a good branding exercise for my clients as they diversify their product range.

As my client has chosen to remain anonymous until closer to product release my services have also provided a good anonymous 'shield' for them. As I have communicated with decisions makers by phone and email this project has allowed me to build an early relationship for my client with their potential customers without the complication of non disclosure agreements or alerting competitors to my client's future launch.