Woolworths During Tough Times

During the 2008/09 global recession, large retailer Woolworths also felt the pinch and resorted to food price reduction and an increase in product range.
The 4 pillar system that Woolworths operates on which includes: food, clothing, homeware and financial services, is an excellent combination of the basic commodities of daily life and from face value, can be deemed as the necessities of life. However, Woolworths has transformed these necessities into ‘quality’ goods that its customers could purchase at a higher price than their counterparts. Every person needs food to sustain his/her body, clothing to protect their body, homeware to use for basic existence and operation in the home, like cutlery, crockery, bathroom accessories etc., but the difference with Woolworths is that they create the impression that their products are far more superior to their competitors and hence they are entitled to charge a higher price.
Post 2004, every organization in South Africa seems to have targeted the ‘Black Diamonds’- even Harley Davidson created a special club for the Black Diamonds and Woolworths also saw the opportunity to increase its market share by attracting the Black Diamonds into its database of customers. It is human nature that once an individual attains affluence; an image needs to be created to reflect that affluence and being a Woolworths customer does exactly that for many individuals.
Due to its competitors reducing food prices, Woolworth was pressurized into reducing its food prices as well because their prices were relatively higher than other retailers. This caused Woolworths to lose customers, as consumers became extremely price sensitive and purchase from retailers that were cheaper with their food items. Consumers were ‘tightening their belts’ and Woolworths target market, the middle-income sector, was the hardest hit by the financial crisis that was experienced in South Africa and therefore Woolworths had no option but to change its strategy, in line...