'Supermarket war' to slash shoppers' weekly food bills by at least eight per cent

  • Woolworths has slashed prices of groceries and services
  • Experts foresee an Australian supermarket war as a direct response
  • Consumers will benefit from cheaper prices and better service
  • But the biggest losers will be independent grocers who cannot compete

Woolworths' decision to slash the prices of groceries this week has experts predicting a consumer saving of at least eight per cent on weekly grocery bills.

Industry analysts have said that Woolworths' decision to lower prices is a direct response to an increasingly competitive market - and this will instigate an Australian supermarket price war. 

Former Choice public advocate turned independent consumer advocate, Christopher Zinn, told Daily Mail Australia that this may not be the best thing for investors but consumers should be delighted.

'This is great news. A price war benefits consumers,' said Mr Zinn. 'The big Australian supermarkets have some of the highest margins in the world and the birds have come to roost.'

'With Aldi set to open 80 more stores nationwide, Woolworths and Coles have had to make changes and a price war means lower prices and more competition. That's a good thing,' he added. 

Scroll down for video 

Woolworths' price reductions set to instigate a massive price war, with consumers dubbed the biggest winners

Woolworths' price reductions set to instigate a massive price war, with consumers dubbed the biggest winners

The business decision by Woolworths' will lead other supermarkets to hit back

According to experts, Coles will remain a market leader with the lowest prices in the industry

According to experts, Coles will remain a market leader with the lowest prices in the industry

According to market analysis company UBS, in the past Woolworths and Coles have existed in a comfortable duopoly but Aldi has changed the industry. 

'Aldi now with critical mass, is changing the behaviour of shoppers and the strategy of the major chains,' reported UBS in annual market report that was acquired by Daily Mail Australia.

And now Woolworths' bold move to lower prices will spark a strong reaction by the other supermarket chains - with Coles, IGA and Aldi forced to hit back.

Woolworths' margins are reportedly the highest in the world, but are now expected to drop from 7.9 per cent to 5.5-5.7 per cent, reports the Sydney Morning Herald.  

Customers are set to benefit from cheaper prices as supermarkets compete for business

Customers are set to benefit from cheaper prices as supermarkets compete for business

Woolworths is fighting hard to compete with Coles with big changes in stores including a focus on service

Woolworths is fighting hard to compete with Coles with big changes in stores including a focus on service

With Woolworths  investing over $600 million into cutting back grocery prices and providing better customer service. 

But a more aggressive response by Coles is anticipated as it fights hard to keep its market leadership.  

Over the past three days Woolworths cut costs and reduced prices on thousands of grocery products to compete with rival supermarket giants Coles and Aldi

Over the past three days Woolworths cut costs and reduced prices on thousands of grocery products to compete with rival supermarket giants Coles and Aldi

A Woolworths spokesperson told Daily mail Australia that the company has been working very hard to make sure that the products are available at a low price.

'We recently pulled together a sample trolley of products that show since January, on a $246 shop NSW customers would now pay $200. That's a saving of $46.

'Our commitment to great low prices does not stop there. Alongside our regular in-store specials and offers, customers with a Woolworths Rewards card can save money on future shops by taking advantage of our wide range of orange ticket products,' the spokesperson said.

But Morgan Stanley analyst Tom Kierath said that Coles would be hard to beat. Mr Kiearth also alluded to the British price wars, claiming Coles' model of price reduction will remain a consumer favourite.

'The similarities to the UK margin unwind are stark, with Tesco now in the fifth year of price investment and its like-for-like sales growth is still negative,' Mr Kierath told the Sydney Morning Herald. 

Woolworths launched a new rewards program this year to entice customers to stay loyal to the retailer

Woolworths launched a new rewards program this year to entice customers to stay loyal to the retailer

Woolworths has invested a greater amount in groceries and changed its loyalty rewards program

Woolworths has invested a greater amount in groceries and changed its loyalty rewards program

But the first comment on the post was a negative response that was liked by over a hundred people: 

'Yes Woolworths terrible change. I spent $360 on our weekly shop and earnt a big 56cents with your new program! Whoopee!! 

'Plus I was just due to get another $20 auto rewards gift card. Guess that's not coming anymore. What is to happen to the thousands of frequent flyer points we earnt unclaimed that I will never use anywhere else? Guess it's time to look at Coles and their frequent flyer program. 

'I am sure my $400 per week will earn me something more than 56cents there. Very disappointed! Oh btw (sic) you say customers asked for this. Rubbish - I was never asked and don't know anyone who was!' wrote customer Anne Benette.

Not everyone is happy with Woolworths' new reward program, with many favouring the Coles program

Not everyone is happy with Woolworths' new reward program, with many favouring the Coles program

There is a constant battle for supermarkets to maintain competitive edge 

There is a constant battle for supermarkets to maintain competitive edge 

Aldi is also expected to weigh in on the price wars by making changes to keep customers in their stores

Aldi is also expected to weigh in on the price wars by making changes to keep customers in their stores

Woolworths' latest reward program has already received flak from customers. 

After launching its program on it's Facebook page, Woolworths' received complaints from customers with social media users praising Coles' reward program.

'We've launched our new Woolworths Rewards program this week and this means you will now earn money off your shopping twice as fast,' wrote the retailer. 

Others responded to Ms Benette's message by urging her to switch over to the Coles' program.

Customers can expect more enticing promotions on groceries as retailers compete 

'Go Coles 1 point for every dollar you spend 4000 points is a gift card for 20 dollars at coles target kmart etc much bettet (sic)' another Facebook user responded. 

Despite the risk, Woolworths' outgoing chief executive Grant O'Brien said the Australian grocery market has 'historically been a rational market.'

Mr O'Brien said Woolworths' will continue to compete with Coles.

'I don't see any reason why that shouldn't continue,' he said of the price wars.

Experts also predict that Aldi will try to keep a competitive edge but said the biggest price-war losers will be independent grocers. 

The biggest losers of the big supermarket price wars are set to be independent grocers

The biggest losers of the big supermarket price wars are set to be independent grocers

Woolworths' new strategic plan will affect industry margins but experts are not convinced it will pay off for the retailer

Woolworths' new strategic plan will affect industry margins but experts are not convinced it will pay off for the retailer


The comments below have not been moderated.

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

We are no longer accepting comments on this article.