If the Australian grocery retail market was a football league, the same two teams would constantly come out on top. But Prime Minister Anthony Albanese wants a bit more argy-bargy, a bit more healthy competition on the field, which is why he’s pitching an expansion.
On a recent trip to the United Arab Emirates, Albo urged billionaire businessman and chair of LuLu Group, M. A. Yusuff Ali, to bring his chain of LuLu Hypermarkets to Australia. With over 250 stores across the Gulf states and an average store footprint nearly three times that of local supermarkets, LuLu could seriously disrupt the state of play for Aussie grocery retail.
For now it is just an invitation, but what are the implications of a goliath like LuLu setting up shop in Oz?
🛒 LuLu Hypermarket is one of the largest retail chains in the Middle East, each store boasting nearly 10 000 square meters of hybrid grocery/department store-style shopping, with food, clothes, gadgets and homewares to be had.
🛒 As you’d expect from such a behemoth, large sales volumes keep prices down, there are plenty of bargains to be found, and they’re usually situated on the edge of town.
🛒 Divestiture laws were previously proposed to break up the Big Two, but the PM said we’re "not the old Soviet Union" and prefers to check their dominance through competition.
🛒 Retail experts like Lisa Asher contend that “the focus should be less on large foreign chains entering Australia's grocery market, and more about empowering local entrepreneurship”. (source)
There’s little doubt that LuLu’s presence in Australia could shake things up – especially as shoppers feel the pinch and prioritise value – but it’s not so simple for LuLu to get established. That’s because:
⚠️ Location and space pose a significant challenge for a hypothetical hypermarket like LuLu. It’s slim pickings for real estate of that size, not to mention the fierce competition from existing suburban supermarkets.
⚠️ Australia straight up doesn’t have the population density to support more supermarkets, especially when most areas are already well serviced by Coles, Woolies, Aldi, IGA and other independents.
⚠️ It’s not the first time a foreign hypermarket has tried to call Australia home. German retailer Kaufland invested half a billion dollars and secured two dozen potential sites before abandoning ship in 2020. Something wasn’t working for them. Could it pose a problem for LuLu too?
In short
Commentators call it “unlikely” that the Middle Eastern hypermarket will land mostly due to, well, land. But as we conclude time and again in this section, staying resilient in the face of change, and cost-of-living, and country-hopping competitors named LuLu… is not a matter of playing the game, but playing to your strengths. Smaller retailers have plenty of moves that beefier retailers don’t – including nimbleness, hyperlocal supplier relationships, niche products and loyal customers. So let’s see how this plays out!
👉 Do you think Australia needs more hypermarkets? Hit reply and tell us.