The Australian grocery market was highly fragmented during the 19th century and was typically solely managed, regionally specific and served a very small community. Improvements occurred in the 20th century with the development of supermarkets that provided a one-stop shop for their customers (Deloitte, 2012). The supermarket and grocery sector is a major contributor to Australia's retail turnover, (Alexander), with revenues in excess of A$80 billion in 2013-2014, contributing just over 7% of the economy, while the food sector alone contributes around 20%. % of that of the supermarket and the food sector. Furthermore, the sector employs over 280,000 people (Tonkin, 2014). Market Definition Although the supermarket sector is huge and includes a range of products from groceries to appliances, kitchenware, household products and other products, (Tonkin, 2014) we will limit our analysis to retailers only of the food sector. There are two major players in this industry which forms a near duopoly in the market with a total combined market share of over 70%. (Tonkin, 2014) These players are Woolworths and Coles. While fringe players such as ALDI, IGA and Costco, to name a few, hold the remaining market share. A more vivid illustration of market share is shown in Figure 1. Figure 1: Market Share of Convenience Stores (Tonkin, 2014) In 2008, the Competition and Consumer Act was commissioned to ensure that there is fair competition and effective in Australia which applies to all businesses, regardless of their size (ACCC Survey into the Competitiveness of Standard Food Retail Processes, 2008) Change locationThe industry is made up of two separate distribution channels which are the chain vertically integrated...... middle of paper... ...the market is quite high since consumers have very low switching costs. Because products sold in different stores are not differentiated, they are located in close proximity to each other, and factors such as out-of-step pricing, poor quality of offering or service, and empty shelf space each influence the consumer's decision (Australian Government, Department of agriculture). and thus making it quite easy for consumers to switch stores. Because of this, the price elasticity of demand becomes very elastic. Buyer power significantly affects the profitability of a business as the price elasticity of demand for these products is very elastic and therefore a slight increase in the price of a product might cause customers to switch to other stores as they have very low switching costs which could decrease the quantity sold and, in turn, reduce the company's revenue. Buyer power is very high in the food industry.