Coles trialling new store concepts, flag changes to “product range mix”

Posted by Daniel Palmer on 15th October 2008

Any hopes of the Coles transformation being complete earlier than the five year estimate appear forlorn given the frank assessment of current Chief Executive Ian McLeod at an investor briefing held by Wesfarmers yesterday.

Mr McLeod suggested the supermarket chain had suffered from “chronic underinvestment”, a “lack of cohesive strategy”, and was “fundamentally broken” when Wesfarmers took over Coles in November last year. A basic “spring clean” was underway with $100 million to be spent on updating neglected stores.

The five year recovery process is reportedly on track, with three phases identified to reach the five year goal. Among the goals are to: improve the supply chain; the freshness of their range; and the look of their stores. Mr McLeod also highlighted that their promotions will change, with a focus on fewer but more compelling promotions.

Mr McLeod suggested the past management team’s promotional strategy lacked a clear focus and needed to be refined. “We were either driving for sales by pulling the lever hard … or slamming back on the brake and putting prices up to drive margin,” he said.

The company has managed to poach a number of leading retail executives from around the world, particularly the UK, with the help of former Asda boss Archie Norman and the leadership team has been completely overhauled, with all the current team new to Coles or their role since the takeover.

A full private label review is underway and pilot stores have been developed to guide the format of new stores. One of the trials has been a reduction in the range of some groceries, with the early results “encouraging”, according to Mr McLeod.

Coles has today disputed claims made by some media outlets that its plan is to reduce the product range by 30% in coming years. “Contrary to media reports, Coles does not have a plan to reduce product range in its stores by 30%,” they advised in a statement. “As part of the work to turn around the business, Coles is trialling a number of retailing concepts and experiments in selected stores. One store is trialling a change to the product range dynamics, reducing the range in some product categories and expanding the range in others.”

“While we believe there are potential opportunities to improve the range mix in our stores to offer customers more choice, at the moment we are talking about a trial in one store,” the statement concluded.