Coles Group expects capital investment to hit $1.4 billion next financial year, as it plans to double-down on automation and create a better e-commerce experience for customers.
The spend will see the retail giant reach a peak year since its demerger from Wesfarmers in 2018, around $300 million higher than the $1.1 billion forcasted this financial year.
Coles said the increase has largely been driven by the many business projects requiring multi-year investments.
Coles said it has also been building developing a clear strategy to drive performance with increased investment in technology and new operating processes.
Speaking at the Coles Strategy Day, CEO Steven Cain said the company is set on pushing growth through IT investment in the wake of Covid-19.
Cain also pointed to Australia’s growing population as a strong motivator behind its capital spend.
“We want to win online, we’ve talked about that and we expect online sales to be more than 10 percent of total sales going forward,” he said.
“We think we will have the best offer both in stores and online in the future, and that will have a competitive advantage through the automation, and smarter selling programs.”
Coles smart selling program is designed to reinvest funds back into the business by reducing down unnecessary costs.
The supermarket giant said strong progress has been made on its smarter selling program and is on track to deliver an excess of total benefits of $500 million by the end of this financial year and another $200 million by 2022.
Smarter selling reinvestment opportunities marked by Coles involve accelerating e-commerce channels, better decision making analytics andcontinued upgrades of digital catalogues.
The program came into play two years ago when Coles moved its strategy to combat the shift to online and the underinvestment in IT systems.
Coles said further capital investment will be need in 2022 and 2023 financial years to finalise remaining targets.
A significant part of Coles $1.4 billion spend also stems from its continued investment in its Witron and Ocado automation programs.
Expected operational coats for Witron and Ocado are currently $75 million in FY22, before increasing to $160 million in FY23.
Progress is still underway for the two Witron and two Ocado automation centres located across Queensland and New South Wales.
Coles will also continue to invest in its Click and Collect plus expand its home delivery service.
The company is also planning to launch a transactional app in early 2022 that will allow for mobile fuel payments.
The idea will be the first of a series of initiatives to enable Coles Express to be more involved in serving calls customers digitally.
Machine learning and artificial intelligence
Chief information officer Roger Sniezek said Coles is utilising artificial intelligence and machine learning across a large number of use cases.
“We are deploying foundational future capabilities such as master data management and order management are migrating progressively to the cloud, where we’ve also built the foundation of our enterprise data platform,” Sniezek said.
“Within technology innovation, we have a team called Lab 288, which focuses on emerging technologies that can deliver material value to Coles group.
“The core team with expertise in the fields of machine vision, robotics, mechatronics and electronics, collaborate across the business on high value use cases.
“We also work with partners like Accenture and Microsoft on various new innovations, and this typically leads to a proof-of-concept in our stores or distribution centres.”
Sniezek said Coles is continuing its “journey to agile, with our e-commerce team leading the way”, while training the Coles team in Microsoft Azure.
“The volume of work in the business technology roadmaps is significant,” he said.
“Coupled with the underpinning work to deliver the technology strategy we’re forecasting a 1.9 times uplift in technology investment in the next financial year, compared with our FY 18, this clearly demonstrates our commitment to a technology led strategy.”
Sniezek added “great example of a business application which showcases the technology strategy is smarter forecasting.”
This was built by Coles internal analytics team and allows them to predict sales for supermarkets powered by a “wide range of AI models.”
“We passionately believe that these models are unique to Coles, and we should own the IP, and since we own the models were able to continuously improve them and respond to new conditions.”