By definition, an Oligopoly is “where a market or industry is dominated by a small number of sellers (oligopolists)”. In Australia, we have an oligopoly retail market, with Woolworths and Coles (owned by Wesfarmers) as the two major players in our retail space. In fact, recent consumer spending figures show that these supermarket giants reportedly account for around 40% of every dollar spent by Australian consumers in the retail market.
Whilst most of us are aware of the amount that we spend on groceries when shopping at Coles or Woolworths, we may not be aware of how much we are spending with these companies in their other household retail brand stores.
Both Woolworths and Wesfarmers have purchased many well-known Australian businesses to diversify their investment portfolios and provide a larger offering to the Australian consumer. The retail giants operate supermarkets, department stores, home improvement and office supplies as well as liquor outlets. The companies owned and operated by Wesfarmers and Woolworths are some of Australia’s largest household name brands including:
|Home Timber & Hardware
|Thrifty Link Warehouse
|First Choice Liquor
Wesfarmers and Woolworths have also teamed up with Shell and Caltex respectively to offer fuel discounts and build customer loyalty. And both companies are now venturing into the direct insurance market, offering car, home, pet and travel insurance products.
In addition both companies continue to build significant property portfolios with Wesfarmers owning over 95 licensed venues and hotels and Woolworths a massive 294 local pubs and hotels including the Kirribilli Hotel in Sydney, Young & Jacksons in Melbourne and the Breakfast Creek Hotel in Brisbane.
To complete their portfolios, both Wesfarmers and Woolworths have acquired a number of businesses in the industrial, mining, chemical, energy, fertiliser and safety product industries. And Wesfarmers has a number of private equity companies and investment houses.
As at July 2014, Wesfarmers’s market capitalisation (total value of the shares on issue) was approximately $49.9 Billion1 and Woolworths $44.88 Billion1 which see both companies form part of the ASX top 20 stocks (Australia’s top 20 largest companies).
We’re already spending around 40% of every dollar spent in retail with Wesfarmers and Woolworths and both companies have significant plans for future growth which include the purchase of more well-known brands and retail chains.