Foreign supermarket chains entering Australia’s grocery market may not be the straightforward solution some believe, according to retail experts. Prime Minister Anthony Albanese has invited the Emirati hypermarket chain LuLu Group to compete with established players like Coles and Woolworths as Australia negotiates a free-trade agreement with the United Arab Emirates. LuLu Hypermarket is one of the largest retail chains in the Middle East, operating over 250 outlets across the Gulf region and beyond. "I have encouraged [LuLu Group] to come to Australia … we need more competition in the Australian supermarket sector," Albanese stated in late September.

Despite the potential for increased competition, experts caution that entering the Australian market is complex. The UAE ranks second in median household income, while Australia is around eleventh, according to the World Population Review. This disparity suggests that local customers may have different spending habits. For instance, LuLu's prices for everyday items are generally higher than those at Australian supermarkets, with two liters of milk costing approximately $4.98 at LuLu compared to $3.20 at Woolworths and Coles.

In terms of eggs, LuLu offers a 10-pack for about $8.83, while Aldi provides a 12-pack for $6.19. Instant coffee is priced at $9.43 at LuLu, compared to $5.50 at Woolworths and Coles. For toilet paper, LuLu's eight-roll pack costs $7.72, while Coles offers a lower price of $4.60.

Retail expert Lisa Asher from the University of Sydney noted that Aldi, which entered the Australian market in 2001, took 24 years to establish around 600 stores, capturing less than 10 percent of the market. "This idea that it's easy to get market share when Aldi is one of the most innovative grocery retailing models that we have at the moment in the world … underestimates how hard and how long it takes to have an impact in the Australian market," Asher said.

Barriers to entry in the Australian supermarket sector are significant, particularly in metropolitan areas. Finding suitable locations for new stores poses a challenge. Dr. Sanjoy Paul, a supply chain expert from the University of Technology Sydney, pointed out that German supermarket giant Kaufland abandoned its plans to enter Australia due to a lack of suitable sites. He noted that Woolworths has acquired over six hectares of land in a growing community west of Brisbane over 11 years, yet establishing a supermarket remains years away.

Asher added that LuLu's hypermarket model, which requires substantial space, complicates its entry into the Australian market. However, Dr. Paul mentioned that LuLu could benefit from existing relationships with Australian producers, as many already sell products in the UAE.

Prime Minister Albanese has dismissed proposals for divestiture laws aimed at breaking up major supermarket chains, stating that Australia is "not the old Soviet Union." He emphasized that he would not forcibly dismantle supermarket giants. Dr. Paul believes that addressing market concentration requires examining how major supermarkets interact with their suppliers rather than resorting to divestiture.

Asher argued that without divestiture powers, Coles and Woolworths face minimal competition. She highlighted that in 2000, Franklins held about 12.3 percent of Australia’s market share, while no single retailer outside of Coles and Woolworths currently exceeds 8 percent.

Experts suggest that the focus should shift from attracting large foreign chains to empowering local entrepreneurship. Asher referenced research on Western European retailers entering Eastern European markets post-Cold War, noting that homegrown businesses tend to endure longer. "Food is culture, and culture is contextual to that nation," she said, emphasizing the importance of local businesses in the grocery sector.