Cautious customers

The market is watching the battle between Woolworths and Coles very closely at the moment, as commentators wait to see if Coles (now owned by conglomerate Wesfarmers) can regain some ground on Australia’s biggest, and, arguably best retailer.

On the surface, it looks like Coles is catching up. Coles’ food and liquor sales in the September quarter were up 7.3% (6.1% on a same-store basis) which compares quite well with Woolworths sales growth of 7.8% (5.8% on a same store basis).

The reaction of the market probably tells a better story – Woolworths shares dived after its result, while Wesfarmers shares were up as much as 6% this morning.

While the gap between the grocery giants appears to be closing, equally interesting were comments from Coles’ new Scottish boss, Ian McLeod, who said consumer sentiment remains fragile and shoppers continue to be “value conscious”.

In other words, the bargain hunters are still well and truly the dominant customer at present.

It’s yet another example of why we (and RBA Governor Glenn Stevens) shouldn’t be getting too excited about the surge in consumer and business confidence. While people might be saying they feel happy, that is simply not translating into new sales at this point in time.

How does this impact your business? Well, it’s another reason to keep your sales team as focused and hungry as it was in the downturn.

Yes, it is important to start thinking about growth opportunities you can grab as the economy recovers, but your sales people need to understand that customers are still hesitant to sign on the dotted line.

All the strategies you used during the downturn – value adding, bundling, preferential trade terms – are still important.

Confidence is crucial, but it doesn’t pay the bills.