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Suzannah reflects on recent last mile delivery updates from Australian retailer, Coles.

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Coles has piloted a small-scale grocery home delivery service with Uber in Australia.

Becoming more agile

Coles has partnered with Uber’s UberRUSH brand, currently operational in several US cities. It will support customers who have missed items from their original online orders to be delivered same day, offering customers greater flexibility. This allows the retailer to be more agile and could ultimately speed-up delivery times. Coles currently has its own dedicated fleet of vans - it will be interesting to see if Uber's infrastructure can help Coles lower its distribution costs.

Why now?

Competition for online delivery for groceries in Australia is expected to intensify over the next 12 months, particularly with Amazon expected to enter the market. This threat is now larger than ever since Amazon bought Whole Foods Market last month, increasing its ability to blend online with offline retail extremely quickly.

Coles has reported sales growth of 0.3%, following a challenging year with supply chain disruptions.

Supply chain disruption

Coles' overall performance was impacted by ongoing price cuts that resulted in price deflation for the year of 0.8%, coupled with cost inflation and supply chain disruption caused by Cyclone Debbie. Its core business continued to see modest growth, aided by new store openings, with sales growth of 0.3% to AU$38,725m in the 52 weeks ending 25 June 2017, with EBIT declining 13.5% to AU$1,609m.

Investing in availability

Coles continued to make improvements through the year focusing on price, range, service, quality and availability, with a view on long-term sustainable benefits. The retailer continued to simplify its range, helping improve availability and put more emphasis on product innovation, plus invested in additional in-store hours and staff training courses.

Managing director, Richard Goyder, said: "In a very competitive environment, Coles invested in value, service, and better quality and availability in Fresh, to deliver continued growth in sales. Coles continued to execute its customer-led strategy, which it expects will provide a platform for sustainable growth in earnings and return on capital over the long term."

Coles has launched its first dark store in Melbourne, as it explores new ways to fulfil the growing demand for online orders.

Coles' online business has grown 25% this year

The first dark store is located in Richmond, an inner suburb just to the east of Melbourne's CBD. The operation will initially serve customers located within 5km of the facility. This is the first dark store that the retailer has launched, almost two years after Woolworths launched their first dark store in Sydney. Coles this week revealed that online grocery sales grew 25% this year and experimenting with these new types of fulfilment solutions will help it maintain both growth and the level of service it can offer customers via the online channel.

Testing the water in high density locations

John Durkan, Coles MD, commented, “We are testing to see if we can get volume through a small-scale picking and delivery operation”.  The Coles boss also said that the model is expected to be suitable only to select areas of the country where population density is of a certain level.

If you’re looking for more on Coles, check out our Coles Hub page, where you’ll find recent news and our Coles supply chain snapshot, which includes the retailer’s latest performance, supply chain priorities and logistics network.


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