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Coles uses anonymous data to decide new store locations

Transaction data helps retailer determine which new store locations could be most profitable

Supermarket and liquor retailer, Coles, is using anonymous transaction data from stores around Australia to see what products sell best and which new store sites could be the most profitable.

Speaking at CeBIT’s Big Data conference in Sydney, Coles strategy general manager Richard Wormald told delegates that one of the most important uses of transaction data for the retailer was to work out where to put a new store, how big it should be and what products it should offer.

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“The place to start is what business problem you are trying to solve with data,” he said. “In retail today, store location and ease of parking are a major factor in determining which store a customer will choose."

According to Wormald, this is a big investment decision when the retailer has lease commitments of 20 years or more.

“If you put a store in the wrong place, it can be a major drag on the business for many years.”

Once the store is open for business, the next decision for Coles management is to work out what product lines should be included.

“For example, in Western Australia we are adding more products that are manufactured in WA to stores,” he said. “This resonates very well with customers and results in bigger baskets across the rest of the store.”

Wormald added that Coles was undertaking the same locally-manufactured product strategy in SA while in other states and territories it was adding more product lines from overseas such as Chinese food.

“In terms of contacting customers to drive offers, something we have learnt is that if you try to have a very narrowly focused offer – for example switching a customer from one brand to another – then you need an awful lot of those offers to be relevant to a wide enough group of people,” he said. According to Wormald, this meant Coles staff needed to make a huge investment in time and resources for marginal returns. In addition, customers are very savvy when it comes to targeted offers.

“Customers choose to shop with Coles based on common sense and good value. They won’t be fooled by offers that are designed to switch behaviours,” he said. Instead, the retailer now uses broad-based offers that reward customers with low prices.

Flybuys and loyalty

Wormald said the re-launch of its Flybuys card in April 2012 was undertaken to gain a better understanding of the retailer's customer base and to grow communication channels.

“When we re-launched Flybuys we looked at a number of options as to how we would re-launch,” he said. “One of these options was the traditional placing of cards in stores for customers to pick up.”

However, Coles went for a different approach in order to reach as many customers as possible. It sent cards to 8.5 million customers around the country over one week.

“What that did was prompt customers who were in the [FlyBuys] scheme already to re-register,” Wormald said. “Now we’ve got is an email base that’s significantly larger than it was previously but it’s also up to date.”

Follow Hamish Barwick on Twitter: @HamishBarwick

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