Can digital transformation deliver cost savings to retailers? Source: Shutterstock

Can digital transformation deliver cost savings to retailers? Source: Shutterstock

Can technology help retail giant Coles save $1 billion over 4 years?

DIGITAL might disrupt the brick and mortar store, but retailers aren’t giving up (market share) without a fight.

Australian retail giant Coles, with more than 2,500 retail outlets servicing 21 million customers every week, is embarking on an enterprise-wide digital transformation journey to delight customers and deliver on changing expectations.

In fact, the use of technology across the organization is expected to deliver AUD1 billion (US$700 million) in cumulative savings over the next four years.

“We have committed to being technology-led in our stores and throughout our supply chain to reduce costs while delivering an even better shopping experience for customers and making life easier for our team members,” Coles Chief Executive Officer Steven Cain said in a press release.

Coles’ first initiative adopting technology across stores is “Smarter Selling” and includes automation of manual tasks both in stores and in support functions, faster checkouts, using artificial intelligence for quicker and more accurate stock ordering as well as reducing energy use, and smarter planning in distribution centers to improve availability.

Coles intends to use intelligent decision making to optimize its store network to increase sales density and improve profitability, tailoring up to 40 percent of floor space in stores to meet the needs of local customers.

“Stores catering to value-focused customers will have a simplified range focused on essential items and self-service; where there is demand for a more premium offering, stores will have an extended range including more ‘foodie’ oriented and convenience products,” Cain explained to shareholders recently.

Interestingly, Coles has been working over the past several months to amplify its digital footprint and better serve customers.

Aside from launching two new ambient automated distribution centers last year, Coles also announced partnerships with leading IT vendors and revealed that it is collaborating with retail technology and supply chain automation companies such as Ocado.

Coles’ business strategy suggests that new store openings will be carefully targeted, with expansion opportunities focused on areas with significant population growth, while Coles Online will focus on improving profitability as the Ocado partnership enables an expanded range and more flexible delivery options.

According to an ASX release, Coles recently told shareholders that it has refreshed its strategy to deliver on its vision of becoming the most trusted retailer in Australia.

“Our strategy will truly differentiate Coles in the Australian retail market, allowing us to lead in Online through an optimised network, as well as making Coles an Own Brand Powerhouse and a destination for health,” said Cain.

“It will also provide long term structural cost advantages while making us Australia’s most sustainable supermarket.”

The strategy is based on three pillars:

  1. Inspire customers through best value food and drink solutions to make lives easier
  2. Smarter selling through efficiency and pace of change, and
  3. Win together with team members, suppliers, and communities.

“As time-poor customers increasingly demand solutions to feed their families easily without compromising on quality, value or nutrition, Coles will expand its convenience and health offerings.

“We will make extensive use of data analytics and artificial intelligence to ensure we are anticipating and fulfilling customer needs as they continue to evolve – we want Coles to be a truly customer-obsessed retailer,” Cain explained to shareholders.

Coles, though recent partnerships and collaborations, has put itself in a unique position to leverage technology as part of a well thought out growth plan.

If successful, the Australian retailer will be a beacon of hope for smaller players struggling to invite customers back into the stores.

“We have an ambitious change program ahead of us, and as we deliver it we are determined not to lose sight of the things that matter most to the communities we serve,” Coles CEO Cain told shareholders.