YOU don't have to cast a wide net to find a Woolworths customer with a gripe about Woolworths. The company's sliding sales, falling share price and earnings pressure are testament to the fact that the customers are ultimately right.
Now the supermarket suppliers have given their quantifiable verdict and the report card is one no shareholder would be pleased about.
Woolworths' score from suppliers is the lowest recorded since the survey began eight years ago.
The UBS Supermarket Supplier Survey, that records how supermarket suppliers rate both supermarket chains across of range of areas, show Woolworths has dropped the ball in numerous respects..
Overall, Woolworths came in with 5.7 out of 10. Coles in contrast improved its score to 7.1 - its highest ever.
UBS notes that most worrying for Woolworths were declines across customer-facing areas such as offering value for money, where Woolworths dropped 0.3 points to 5.6, in-store execution which was a fall of 0.6 points to 5.7 and effectiveness of promotional campaign, down 0.4 points to 5.7.
Morale remains Woolworths' lowest sub-category score.
The other major category in which Coles is significantly ahead of Woolworths is around culture. This was the stand-out result for Coles thanks to a 0.7 point improvement. Coles' biggest lead over Woolworths is in morale, the calibre of senior management and decision-making processes.
In particular, morale remains Woolworths' lowest sub-category score.
Interestingly, this supplier survey has demonstrated over eight years that it has strong form as a clear predictor of like-for-like sales growth.
The survey's drill down into Woolworths in-store performance shows it lags Coles in several key measures that demonstrate why customers have been complaining. These include on-shelf availability of goods, the quality of fresh produce, in store theatre, overall presentation, the calibre of in-store staff, pricing strategy, value for money and competitive pricing.
Coles narrows the gap
It won't come as any surprise that when UBS began this survey in 2007 Coles started well behind with a score of around 4.5 points and Woolworths' ranking was about 6.2 points.
In 2008 and 2009 Woolworths continued to improve but Coles managed to narrow the gap.
Woolworths' score started to move down in December 2011 but the trajectories of the two supermarket chains did not intersect until December 2012 after which Woolworths moved into a gradual decline while Coles continued to gently improve. But it wasn't until 2014 that Woolworths began a steeper decline and Coles improved to gain a decisive lead.
At the heart of Woolworths' problems is pricing: where it lags Coles which has executed a superior strategy using everyday lower prices.
The Cheap Cheap marketing campaign was a poor copy of Coles' successful Down Down. It was not successful because the slogan didn't match the reality in the eyes of the consumer. UBS suggests also that customers prefer to think they are buying 'value' rather than 'cheap'.
Pricing and the perception of price is an area that Woolworths' customers have complained about for a couple of years.
The survey confirms that Coles is also better at promotions - thus better conveying its pricing message.
Woolworths' in-store service levels have fallen thanks to staff cuts - an issue that it has acknowledged and is starting to fix.'
Profits over customers
UBS analyst Ben Gilbert concludes that Woolworths "has clearly lost its way, in our view".
He says this has partly been driven by competition (Aldi and Coles), but also by a focus on profit over customer.
Back in the 2008 financial year, after being acquired by Wesfarmers, Coles was particularly vulnerable. It was at that time that Woolworths could (and should) have seized its competitive advantage by cutting grocery prices, thereby crippling Coles' ability to ever catch up.
Instead Woolworths raised prices and improved its retail profits. This move was great for short-term profits - but it allowed Coles to compete on price and get back into the game.
Coles has demonstrated it is playing the long game.
The UBS survey demonstrates clearly the size and the breadth of task that a new Woolworths boss has ahead of him or her.
When Coles started its revival the competitive landscape was significantly more gentle.
Woolworths will require a $1 billion investment in lowering prices to claw back significant market share.
Both supermarkets now need to contend with the growing threat of Aldi.
Thus the comeback path for Woolworths, which, despite its self-inflicted wounds, is still the most profitable supermarket chain with superior sites, will require fresh management blood rather than internal succession. There is also little debate that Project Refresh will have to extend to its board as well.
