The market value of the goods and services offered by the food and grocery retailers have decreased to over $8 billion in the past three business days. This deteriorating condition of the market has raised the fear of the implementation of UK-style pricing system among the retailers, including Woolworths.

Woolworths' profit downgrade last week prompted fears of a full-blown price war in the retail industry. As the Sydney Morning Herald reported, analysts and investors believe that Woolworths’ investment into grocery prices and service could kick off aggressive response from Coles, Aldi and Metcash. This might lead to the severe price war that would harshly affect the margins throughout the retail sector.

The food and liquor margins of Woolworths are considered highest in the world. However, according to the reports, the margins might decrease from 7.9 percent to 5.5-5.7 percent in 2015. The decline in the margin value would reverse the gain that the retailer giant recorded for the past decade.

The reflexive loss will emerge due to the investment of more than $600 million, which the retailer has planned to make into grocery sector and ensure reduced grocery prices and improved store services. “The deep earnings reset raises the prospect of a price war, given that Woolworths has less to lose,” Deutsche Bank analyst Michael Simotas told Fairfax Media on Tuesday morning.

Woolworths announced its first quarter trading update for 2015 last week, where it said that the profit it earned for half of the year could witness a fall by approximately 35 percent because the retailer’s wish to make huge investments to make up for the losses incurred by its supermarket business. Reports claim that such risky decisions will come as a surprise for other market retailers-Coles, Aldi and Metcash along with the grocery market, shareholders and consumers as Woolworths has always produced most attractive profit margins in the sector.

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