Coles keeps the pressure on Woolworths

A week after the struggling retailer’s strategy update, Wesfarmers produced one of its own, explaining how Coles will keep the pressure up.

It doesn’t get any easier for Woolworths (ASX: WOW). A week after the struggling retailer’s strategy update, Wesfarmers (ASX: WES) produced one of its own, explaining how Coles will keep the pressure up.

For starters, Coles plans to keep improving its store network, upgrading high-performing stores, closing weak ones and filling in gaps in the network – this should ensure that Woolworths gets no free kicks in terms of local competition.

Like Woolworths, Coles is also working on its online offering – making its ‘Every Day’ range, catalogue specials and multi-buys available online, improving in-store picking efficiency and establishing a network of click & collect stores.

Work also continues on the supply chain – optimising product ranges, building reliable demand plans and improving the efficiency of distribution centres and transport. Inside stores, Coles is also improving store layouts and making shelf replenishment more efficient.

Coles probably still has further to go in terms of supply chain efficiency, so can be expected to match any benefits that Woolworths is able to gain in this area – and will likely hand them straight to customers.

Which brings us to prices, where Coles will continue to keep its foot on Woolworths’ throat, extending its Every Day pricing to more products, running more focused promotions and developing its private-label range.

None of this is new of course – it’s just a continuation of the improvements Coles has been making for several years – which is why the retailer seems to have got up a head of steam. Woolworths, by contrast, still looks like the fabled supertanker trying to turn around. For all the talk, it’s hard to see how it can make the necessary cultural changes with the same management team that was until recently running with full throttle on margin expansion.

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