The Analysis On The Prices Of Different Kind Of Supermarket

The analysis on the prices of different kind of supermarket in three different states, Australia Executive summary Findings --

Introduction Business problem Competition in the retail grocery industry has long been a big issue concerned by Australian Competition and Consumer Commission (ACCC). The two major chain stores—Coles and Woolworths reach a combined market share of approximately 75% on packaged groceries (ACCC 2008, p6) [1]. However, in recent years, the competitive came from a famous German grocery brand —ALDI made the relatively stable retail grocery market violate. ALDI promised to offer consumers very low prices on a limited range of groceries (ALDI 2009) [2]. Not only has the industry level, competition for consumers also happened on a localized level. The perishable nature of groceries and the frequency of shopping times per week made the location and price critical factors in the customers’ choices (Walker & Webber 2004) [3]. After knowing the competition is more than price, the aim of this paper is try to find out the relationship between the price variance and location of different retail groceries and then make possible explanations. Statistics Problem Methods --we start with a sample of 120 retail groceries from Coles/BI-LO, Woolworths/Safeway, Independents and ALDI. They are located both metropolitan area and elsewhere in NSW, Queensland and Victoria and the counts of each are 30. Methods: We use the Excel 2003 to do the analysis and download the KaddStat plug-in from www.johnwiley.com.au for histogram function. Descriptive statistics were conducted on the prices of Basic Staple basket at different supermarkets, across three States and different locations among the supermarkets. Median, mean and standard deviations for describing the location of prices and the variability of prices were calculated. Then the variability of prices was compared by coefficient of variation. Finally, coefficient of skewness and kurtosis were presented to comment on the shape of the distribution.

Body Question1 Descriptive analysis The most striking feature of the price data is that compared to three other kinds of retail groceries, ALDI had the overwhelmingly lowest prices of its items. The means of the prices in Coles, Woolworths, independents and ALDI was $83.30, $82.11, $84.47 and $60.43 respectively. For Coles and Woolworths, most of the pricing are in their $80-$84 range and $80-$82 range, respectively. Figure 1 Frequency Distributions of prices of the Basic Staple Basket at different supermarkets (a) Coles

(b) Woolworths

15

Frequency

20

8

Frequency

10 6 4 2

10 5

0 76

78

80

82

84

86

0

88 Prices($)

(c) Independents

76

Frequency

Frequency

6 4 2 0 78

80

82

84

86 Prices($)

(d) ALDI

8

76

78

80

82

84

86

12 10 8 6 4 2 0

88 Prices($)

59. 61 60. 01 60. 41 60. 81 61. 21 61. 61 62. 01 Prices($)

Table 1 Descriptive statistics on prices of four different kinds of groceries Group Coles Woolworths Independents ALDI

Count 30 30 30 30

Sum($) 2498.88 2463.37 2534.21 1813.04

Mean($) 83.30 82.11 84.47 60.43

Median($) 82.37 81.52 84.50 60.25

SD 3.73 2.32 3.39 0.62

Variance 13.92 5.36 11.50 0.38

Kurtosis -0.099 1.188 -0.169 4.373

Skewness 0.826 0.405 0.292 1.511

Range($) 13.88 11.15 14.29 3.04

Location of the distribution The means, medians and the histogram (Figure 1) will be analysed for explore locations. Because median is unaffected by the magnitude of extreme values while the mean is affected by all values including the extreme one, so it is appropriate the location by using them both. In the cases of Coles and Woolworths, both of their means were higher than their median, which indicated that the locations of them are positively skewness. While although in the cases of Independents and ALDI, their means

CV 4.48% 2.82% 4.01% 1.02%

were extremely similar with medians, the location of Independents was still negatively skewed while that of ALDI was positively skewed. Shape of the distribution According to the statistics of Kurtosis and Skewness, their distributions were all positively skewed. However, ALDI had the most positively skewed shape. And ALDI had the most obvious Leptokurtic distribution, while Coles and Independents had both Platykurtic distributions. Variability of the data We use mean and standard deviation to represent the variability. According to the data above, Independents had the largest amount of prices with a second largest degree of SD. It means the prices of Independents varied largely which were volatile in different locations and States. The similar situation occurred both on Coles and Woolworths as well. But the degree is relatively moderate compared to Independents. However, ALDI showed us an attractive result which had not only the lowest prices, but also the smallest prices variance among the four. It means the price in ALDI was the cheapest and most stable one in different locations and states. The possible reason could be as followed. As for Independents, because they belong to private companies which had less competitiveness than big supermarkets, they tend to have smaller scales but more variable and higher prices in different location and States for maintaining their turnover and against the large chain stores such as ALDI, Coles and Woolworths. However, as for ALDI from Germany, its lowest prices derived from its character as a discount retailer. As for Coles, Woolworths and ALDI, the relatively uniform pricing will be convenient for managers to regulate the price tickets and therefore make financial saving possible. Furthermore, the uniform pricing can offer customers a “price guarantee” which will benefit the overall customer numbers (Walker & Webber 2004). Compare the variability of data by using Coefficient of variation According to the CVs above, Coles had the largest coefficient of variance (4.48%), while ALDI had the lowest one (1.02%). It showed us that customers suffered the largest potential money losing when buying products in Coles, while in ALDI, they would not worried about the pricing fluctuation problem among the four types supermarkets.

Question 4 Descriptive statistics Figure 2 NSW

Queensland

Victoria

Table 2 Descriptive statistics on ALDI’s price tickets in three different states Group ALDI NSW ALDI Queensland ALDI Victoria

Count 10 10 10

Sum ($) 603.59 599.36 610.09

Mean($) 60.36 59.94 61.01

Median($) 60.25 60.025 60.84

SD 0.45 0.19 0.58

Variance 0.202 0.035 0.334

Kurtosis -1.02 -0.68 9.87

Skewness 0.388224 -0.56263 3.133484

Location of the distribution From the histogram above, we can see that the ALDI in Victoria had the highest and price. The means, medians and the histogram (Figure 2) will be analysed for explore locations. Because median is unaffected by the magnitude of extreme values while the mean is affected by all values including the extreme one, so it is appropriate the location by using them both. In the cases of ALDI NSW and ALDI Victoria, both of their means were higher than their median, which indicated that the locations of them were positively skewness. However, in the cases of ALDI Queensland, the mean was lower than median which means the location was negatively skewed. Shape of the distribution

Range 1.31 0.59 1.9

CV 0.75% 0.31% 0.98%

According to the statistics of Kurtosis and Skewness, their distributions were all positively skewed with exception of ALDI Queensland which was negatively skewed. Among them, ALDI Victoria had the most positively skewed shape. Furthermore, ALDI Victoria had the most obvious Leptokurtic distribution, while ALDI NSW and ALDI Queensland had both Platykurtic distributions. Variability of the data We use mean and standard deviation to represent the variability. According to the data above, ALDI Victoria had the largest amount of prices with a largest degree of SD. It means the prices of ALDI Victoria varied largely which were volatile at different locations in Victoria. While ALDI Queensland showed us an attractive result which had not only the lowest prices, but also the smallest prices variance among the other two. It means the price in ALDI was the cheapest and most stable one in different locations and states. However, there is one point which should mention. AS for the data of ALDI Victoria, there is probability that the price of $62.50 in certain shop of ALDI Victoria is an outlier. Compare the variability of data by using Coefficient of variation According to the CVs above, ALDI Victoria had the largest coefficient of variance (0.98%), while ALDI Queensland had the lowest one (0.31%). It showed us that customers suffered the relatively largest potential money losing when buying products in ALDI Victoria, while in ALDI Queensland, they would not worried about the pricing fluctuation problem. 和他们说 location 可以考虑统一运输节省成本问题。大城市人多，交通方便，因此就应该相对 便宜，乡村的话贵。 Conclusion This study was conducted on the basis 120 groceries sampling in relation to 4 types of supermarkets in different location at three states NSW, Queensland and Victoria in Australia. As shown in the survey, at supermarkets level, ALDI had the lowest average prices ($60.43), smallest coefficient of variance (1.02%) and prices variance (SD: 0.62), while Coles and Independents had the relatively highest average price ($83.30 and $84.47 respectively), biggest coefficient of variance (4.48% and 4.01%) and prices variance (SD: 3.73 and 3.39) different locations and states. At the level of one kind of supermarket—ALDI, although the result were similar among those divided by states, statistics showed that ALDI Queensland had the lowest average prices ($59.94), smallest coefficient of variance (0.31%) and prices variance (SD: 0.19), while ALDI Victoria had the totally opposite result: the highest average price ($61.01), biggest coefficient of variance (0.98%) and prices variance (SD: 0.58).

However, with the limited sampling size of each kind of retail grocery, this sampling survey cannot make an exactly accuracy location, shape and variability of those location.

Implication As for the retail groceries As for customers Appendix one

Reference [1] Australian Competition and Consumer Commission 2008, Public Submission to the ACCC Grocery Inquiry—Summary of Key Issues, ACCC, Melbourne. [2] ALDI 2009, about ALDI, accessed 21/8/2009, http://www.aldi.com.au/au/html/company/3775.htm?WT.z_src=main [3] Walker, J & Webber, T 2004, ‘Retail Grocery Prices in Victoria: The Relevance of Local Market Conditions’, The Australian Economic Review, vol.37, no.3, pp317-28.