Coles and Woolworths have continuously been under the spotlight for their high prices ever since the government directed the Australian Competition and Consumer Commission (ACCC) to conduct an inquiry into the supermarket sector.
But research shows many shoppers keep going back to the duopoly despite a cost-of-living crisis.
Here's why Coles and Woolworths have such a hold on Australian consumers and why they have no incentive to be price competitive.
Aldi the cheapest once again
Aldi has again beaten Coles and Woolworths in a government-funded shopping basket comparison.
Consumer advocacy group Choice released the results as part of its quarterly survey, sending mystery shoppers to 104 stores across the country in September.
Here is a breakdown of the costs between Aldi, Coles, Woolies and IGA (without specials) from its most recent report:
- Aldi: $50.63
- Coles: $67.90
- Woolworths: $69.29
- IGA: $77.57
Choice's report found there was little price difference between the two major chains, though it had widened from $1.21 in June to $1.39 in September.
This is also the first time Coles has outperformed Woolworths on price.
So why do we keep going back?
The ACCC's decision to take on Coles and Woolworths, accusing them of misleading millions of customers with their pricing practices, was driven by countless complaints from shoppers.
But despite these concerns and three Choice shopping cart comparisons, many Australians keep going back to the same supermarket duopoly.
New research from the e61 Institute shows that within any given month, 76 per cent of shoppers head to either Coles or Woolies for their primary shop.
Almost every one of those shoppers goes to the same store, month after month.
Even when customers do decide to branch out and give competitors a chance, they're unlikely to venture past the two — they move from Coles to Woolies or vice versa.
Nitika Garg says Coles and Woolworths pull consumers into their stores through loss-leading deals. (Supplied)
In areas where three or four of the major supermarkets have a presence, Coles or Woolies (or both) are still dominant.
In other words, there are options but consumers aren't taking them.
UNSW business school professor Nitika Garg says the choice comes down to habit, ingrained through generations.
"People develop preferences for brands growing up," Professor Garg says.
"It might be that our parents used a particular brand of soap, for example, and we got used to that brand.
"We realise it works for us, that's its quality, and that we can go ahead and buy it.
"Aldi doesn't have that recognition right now in the market."
She believes, over time, generation Z may become more familiar with Aldi's brands and develop a preference.
The German-owned chain has a 9 per cent market share in Australia. (AAP: Lukas Coch)
The other side of the equation is Aldi's small network and limited selection of products.
"Because there's less stores, especially as you go out of the metro areas, it becomes unfeasible for consumers to drive and seek one out," Professor Garg says.
Aldi stocks about 1,800 products compared to the 25,000 sold by its big competitors.
Adrian Camilleri, an associate professor of marketing at the University of Technology Sydney, says Aldi's poor brand image alignment might not be getting people through the door.
"Their tagline is 'Good Different' and for many years, they have created advertisements depicting somewhat unique, adventurous customers," Dr Camilleri tells the ABC.
"For traditionalists, being 'different' might reinforce perceptions of Aldi as a lower-tier option."
Ease, comfort and convenience are also key drivers.
Loyalty tax plays a part
A loyalty tax is when a consumer shops with a retailer they have history with, even when they end up spending more than they would have compared to switching to another retailer.
This typically happens because retailers offer better deals to win new customers, leaving existing ones to miss out on these incentives.
More than 85 per cent of Australians belong to at least one loyalty program. (ABC Southern Qld: David Chen)
"Many Aussie shoppers are paying a loyalty tax by visiting Coles and Woolworths over Aldi," Dr Camilleri says.
"One reason for this is trust. Years of shopping at the same place or with the same brand creates an emotional attachment.
"This attachment is often reinforced by small gestures of commitment such as joining a loyalty reward program and investing in branded bags to carry groceries."
The e61 Institute research shows Australian grocery customers "display long-lasting inertia in their choice of supermarket", with many doing most of their shopping at the same store "over long periods of time".
"This behaviour is likely to be reducing the degree of competitive rivalry between supermarkets," author Matthew Elias said.
Increased competition a must
Professor Garg says we're almost a closed economy as far as the grocery retail market is concerned, and that leads to Coles and Woolies having "no incentive to be price competitive".
"The only long-term cure is increased competition in the market, and not some substitute which is suboptimal.
"What we need is a big leader who has the power to match the duopoly in terms of their selection and floor space."
Amongst customers who visit Coles in the first month, 67 per cent continue to shop with the same brand in month two. (ABC News: Patrick Rocca)
Dr Camilleri believes Coles and Woolworths will continue to be the first-choice grocery retailer for the foreseeable future.
"If customers do become more tech-savvy, we could see online grocery platforms such as Amazon Fresh start to chip away at the pair's dominance as customers seeking convenience might decide to entirely skip the visit to a physical store."
The ABC contacted Coles and Woolworths for comment.
A Woolworths spokesperson said other surveys, specifically a JP Morgan analysis exclusive to the AFR, pointed out gaps in Choice's basket comparison reports.
"They don't look at the lowest-priced products from each retailer, and we know when like-for-like products are compared, our prices are much closer to Aldi's," they said.
"We are committed to delivering value to our customers every day, with thousands of specials available each week on the products our customers love.
"In addition to our competitive prices, we know customers choose us because they can do a full shop from our significantly wider range, with the convenience of things like home delivery and direct-to-boot services."
Woolworths and Coles say they're focused on helping customers save money at the check-out. (ABC News: Maani Truu)
The JP Morgan report on grocery price differences from October identified an 8 to 9 per cent "price premium" from Coles and Woolworths to Aldi.
That is less than the 30 per cent gap on a basket of groceries identified by Choice in its September-quarter survey.
Bryan Raymond, the analyst behind the report, suggested that the Choice analysis had several shortcomings, including that home brand and branded items were mixed in their reporting.
A Coles spokesperson also referred to the JP Morgan report.
They said the supermarket offered a wide range of choices "including affordable own brand essentials, premium selections and a range of popular brands all at different price points" to suit different tastes and budgets.
"We remain committed to providing our customers with the best value on grocery essentials each week," they said.
"Cost of living remains a challenge for many of our customers, and we are focused on helping them find value in various ways through weekly specials, value campaigns, online shopping and Flybuys, all of which aim to provide savings, quality products or convenience."
What is the government actually doing?
Earlier this year, the federal government directed the ACCC to conduct a 12-month inquiry into the supermarket sector.
Its aim is to investigate pricing and competition in the supermarket sector to ensure Australians are paying a fair price for their groceries.
In early 2025, the ACCC is expected to deliver its final report, which will provide the government with findings and recommendations.
In a separate investigation, the ACCC launched legal action against Coles and Woolworths in September for alleged breaches of consumer law.
The consumer watchdog alleged prices were temporarily raised for short periods before being placed on "Down Down" and "Prices Dropped" promotions.
Woolworths said it would review the claims and work with the ACCC while Coles said it would defend the proceedings.
'Not a consumer issue anymore'
Professor Garg believes solving the supermarket duopoly needs to be done at a policy level with actionable strategies.
"The government has said in the past that all consumers can save money by being a little clever, muti-shopping and putting in a bit more effort," she says.
"But that's not practical or feasible and it's no longer a consumer-based issue.
"It needs to be solved at a system level where the government needs to step up and fix the issue.
"It's too difficult for consumers to continuously burden themselves with processing new information every single week when they go grocery shopping."