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What The Market Says
BEATEN!
Tuesday, 6th December, 2005  - David Farmer

For well over a decade Woolworth's Dan Murphy has used the simple advertising pledge, 'No body beats Dan Murphy'. They promise to always undercut any competitor's price - just show them the advertisement. Indeed Murphy's say that they scan competitorís advertisements and automatically go under any prices that are cheaper than theirs which means, in most cases, customers do not have to take advertisements along to the store. Yet there was a Dan Murphy advertisement pinned to the wall in a competing 1st Choice store I visited in Canberra with the word "beaten" stamped all over it. With both chains maintaining they will not be undersold, this price war is beginning to look promising for consumers indeed!

If neither side concedes on price and refuses to be undercut where does this take prices? Well, this fight will be won or lost on wine prices. Beer is a duopoly and provides little room to sell different products. While both chains have a unique portfolio of spirits, the great bulk of spirit brands have to be stocked by both ot them. And while each may have an exclusive brand of scotch, prices cannot move far before customers will switch brands so it is near impossible to pad out margins much that way. So back the battle comes to wine.

In many countries that would not matter as so vast is the range of wine from around the world that competing shops can be full of different products and rarely clash on price over the same product. Not so in Australia. The two chains have found it hard to create and develop credible house wine brands and they still are largely captive of the few companies dominating the production end of the wine business. They are having their price war with exactly the same brands and margins are being shaved in a way that will force the remaining independents to stop stocking those lines.

Goodness knows what will happen as each group moves towards its stated aim of having 100 Big Box stores. Shops like this need to work on very low margins to pull customers, and you need lots of customers to reach an annual turnover of the $10 million plus per shop that makes the returns attractive. Are there enough customers in Australia for 200 liquor stores to have sales above $10 million - total sales of over $2 billion a year? It must be very doubtful.

If Dan Murphy's, which at present has 45 stores, can get to 100 quickly and move past that number it will be very hard for 1st Choice, starting with only five stores, to develop, to use that current buzz word, traction. Coles-Myer looks to me to be on a hiding to nothing.

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WHAT THE MARKET SAYS ARCHIVE 2010
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Friday, 26th February, 2010

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WHAT THE MARKET SAYS ARCHIVE 2009
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Monday, 6th April, 2008

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Thursday, 12th April, 2007

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Tuesday, 29th August, 2006

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Wednesday, 23rd August, 2006

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Thursday, 22nd June, 2006

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Friday, 26th May, 2006

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Friday, 8th October, 2004

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Friday, 1 October, 2004

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Wednesday, 29th September, 2004

The Barossa Wine Show, September, 2004

Monday, 25th September, 2004

A Quick Trip to Dan Murphy's

Friday, 24th September, 2004



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