Thursday, August 07, 2008

Grocerychoice - a strange site

For international visitors, the Australian Competition and Consumer Commission (the ACCC) is the body responsible (among other things) for consumer protection. The Government asked the Commission to carry out an inquiry into grocery prices. The newly established grocery watch site was one outcome.

Now for a site that is meant to help people make sensible shopping choices it is not of much use. However, for a statistics nut like me it has some interesting features. So come and explore.

You will find the entry point here.

The first thing that you have to do is to key in your post code or town. Alternatively, you can click on the map.

I live in Rosebery just at present, so I click in 2018. Here we find a table setting out average prices for various baskets of groceries for the inner Sydney east region. Average prices are provided for Coles, Woolies, Franklins, independents plus Aldi. Aldi prices are limited to just one category, basic staples basket, because of Aldi's limited range.

What does the information tell us?

Average prices at Coles and Woolies for the total of the baskets are much of a muchness, Franklins is more expensive, the independents more expensive still.

The picture changes when we look at the basic staples basket. Here Aldi is the cheapest by a significant margin ($61.66), followed by Woolies ($76.23). The independents are most expensive at $86.08.

In general, the broad price ranges do not come as a surprise. I do know my shops. However, I was surprised at the higher prices in Franklins, while the size of the gap between Aldi and the next cheapest in the basic staples basket was larger than I had expected. I tend not to shop at Aldi because I don't know the brands, so this is actually useful information.

All this raised the fascinating question, fascinating to me at least, of competitive dynamics. To the degree that people do visit this site, then I would expect it to have at least some effect on pricing policy, reducing average price ranges between chains.

Another thing that interested me was the way the site might reveal real variations in prices between different areas of Australia. For example, grocery prices in country areas have traditionally been considered to be higher than in Sydney because of the impact of higher transport costs.

To test this, I looked at average grocery prices in north eastern NSW as compared to inner Sydney east. Here there was a surprise.

The lowest price for a complete basket of groceries in inner Sydney east was $154.84, the highest $173.75. The equivalent figures in north eastern NSW were $151.09 and $164.98.

If we look at the basic staples basket, the inner Sydney east range is $61.66 to $86.08. The equivalent figures in north eastern NSW are $60.14 to $81.33.

In this case at least, country grocery prices are lower.

I have not tested this against other Sydney or country prices. However, what I think is clear is that the new site will provide another measure of regional price variations.


The new web site has attracted substantial criticism, some of it misplaced. However, a comment by ACCC boss Graham Samuel pulled me up. Defending the site, he suggested that it would force the independents to lower their prices.

If correctly reported, this comment made we wonder about his knowledge of the sector. Anybody who shops around knows that the independents do tend to be more expensive, especially in speciality lines like snack-foods. There are solid economic reasons for this, reasons that will continue.

It's partly a matter of volume, partly of range, partly of location and market niche. So don't hold your breath waiting for independent prices to fall!

Postscript 2, 3 September 2008

I see that the smaller grocers are complaining that the new site favours the grocery giants. Most independents will not be as competitive for the reasons outlined above. However, the claim now is that lumping all independents together is in fact damaging those independents who do have the capacity to compete on price.

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