Coles and Woolworths are posting big profits. How are supermarkets cashing in during one of the most financially challenging times faced by Australian households?
Both supermarkets say their profits are due to people spending less on eating out
Coles also reported sales revenue was up by 6.1 per cent for the financial year, with cash profit rising to $1.1 billion from $1.05 billion the year before.The supermarket giants say their profits are due to customers affected by the cost of living crisis cutting out discretionary spending such as eating out, in favour of groceries.
But Professor Nikita Garg from the UNSW School of Marketing said people spending more on groceries and making less discretionary purchases can’t be the only reason supermarkets are enjoying a surge in profits.“The fact that supermarkets are making this much profit is an issue because somewhere along the line they have had to carry forward excess margins. When we had supply issues, prices went up and on some items prices are still high,” Garg said.
"Once the disruption to the supply chain is fixed, it becomes harder for a retailer to roll back on that profit margin, especially if their consumers are already used to paying more for the same product,” she said.Origin Energy reports $1 billion profit amid cost of living crisis'Shrinkflation', or the concept of a product shrinking in size but being sold at the same price, is a practice that helps supermarkets to safeguard profit margins.
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