Down, down with self-service as Coles brings back check-out chicks

FRANK CHUNG
news.com.au

More check-outs, more staff: Coles is making a customer service statement.
COLES will install extra check-outs at 200 of its 762 stores over the next nine months and increase staffing numbers on existing check-out lanes to reduce customer wait times.
As part of a multimillion-dollar customer service investment, the supermarket giant will also increase the number of manned express lanes, increase the number of staff in its self-service check-out areas to help customers, and install new service desks.
Coles began to roll out self-service check-outs in June 2009 and they are found in 95 per cent of its stores today. Many staff were shifted to other parts of the supermarkets, such as the bakery, deli, fresh produce and shelf stocking.
It is understood many of those positions will now be returned to the front of the store, with thousands of staff hours having been freed up through efficiencies that have cut down the time it takes to complete tasks.
For example, shelf-ready packaging for items such as confectionery means staff no longer have to hang up individual bags of lollies on hooks — they simply tear the cardboard top off and slide it onto the shelf.
Similarly, Coles has overhauled the way staff affix price tickets on shelves. Previously, tickets would be printed out in large batches per section, in no particular order, with the staff member having to sort through a pile to find each individual item.
Now, tickets are printed left to right, top to bottom order to correspond with shelf positioning, so the process can be carried out in a fraction of the time.
Other changes include standardising carton sizes to fit onto shelves without wasting space, installing milk “roll cages” that slide straight into the fridge, and improved demand forecasting to prevent wastage.
While boring and finicky on their own, cumulatively these “simplifications” add up to massive labour efficiencies. Coles has made implementing them a major focus over the past two financial years, during which time it has added more than 1100 new positions to its supermarket operations.
It’s also doubling down on its commitment to face-to-face staff training in its deli, bakery, fresh produce and meat. In the 2014-15 financial year, Coles invested 170,000 hours of face-to-face and on-the-job training in its fresh division, undertaken by 50 per cent more team members than the previous year.
It’s planning to invest in a further 120,000 hours of staff training in the coming financial year.
A Coles spokesman confirmed the move to news.com.au, but would not reveal how much would be spent on the overhaul and store fit-outs. “Coles delivers cost savings by driving efficiencies internally and simplicity in the way we work — and we reinvest those savings directly into prices, quality and service,” he said.
“We are reducing complexity in the way we do business to remove unnecessary costs and drive productivity so we can deliver better value and service to our customers.”
Craig Woolford, retail analyst with Citi, said Australian supermarkets were trying to find the balance between the need to offer full service to customers while improving efficiency and reducing operating costs.
“They have to be very careful about getting the balance right,” he said.
“Efficiencies can be measured in a whole bunch of ways. In supermarket retailing Coles and Woolworths have roughly twice the number of staff per store compared to Aldi.
“It looks like both retailers are on a journey to narrow some of the gap. It’s difficult to fully close because the business models are so different, but initiatives around the edges that reduce the double handling of inventory or speed up transactions are going to help.”
Asked whether the move by Coles was in response to customer backlash against self-service check-outs, Mr Woolford said the data provided by the retailers in the past around the number of self-service transactions suggested “consumers are happy to use them”.
However, marketing expert Barry Urquhart said his research showed 84 per cent of customers surveyed said they would prefer to be served by a human.
The study of 1000 shoppers across Sydney, Brisbane, Melbourne and Perth found men were happy to use self-service when buying six items or less, and 12 for women. Above that, customers reported feeling resentful at doing the stores’ work for them.
“They think, hold on, I’m saving you money, where’s the advantage or benefit in it for me?” he said. “That’s when they become frustrated.”
Mr Urquhart said the move back towards manned check-outs showed retailers had misjudged the response of consumers, nearly one quarter of whom visit a supermarket up to five times a week.
“I think the supermarkets got ahead of themselves, thinking [the trend] was all going towards automation when that’s not the case,” he said.
He warned that by pushing customers into self-service, supermarkets risked losing loyalty in the same way the banks had since starting to reduce branch numbers around 10 years ago.
“The average adult Australian today has 3.8 financial accounts with 3.1 financial institutions — there’s no loyalty to the banks anymore. The banks don’t need more customers, they need more loyalty and consolidation,” he said.
Mr Urquhart, who is based in Perth, said his market research showed consumers had “high expectations” for the launch of Aldi in Western Australia next year.
“We asked people, when we say ‘cheap supermarket’ what’s the first brand that comes to mind? The single biggest response was Aldi, and they’re not even here,” he said.
“Interestingly, every Aldi store you go to has a human being at every check-out. The allure of cheaper prices and personal service is influencing how people buy.”
It comes after Woolworths earlier this week revealed it would spend $65 million on refurbishing its ageing stores, while increasing staff numbers to address customer service concerns.
Citi’s Craig Woolford said Woolworths should really be spending in the order of $200 million on the refresh, but that didn’t include staffing costs.
“Over the last three or four years, we’ve seen Woolworths maintain a very tight control on costs, and in our view that has compromised in-store execution, such as on-shelf availability of products and the length of check-out queues,” he said.
“We think Woolworths has taken out up to 15 staff per store over the last three or four years, and now they’re putting in about an extra four staff on an equivalent basis,” he said. “I would argue there’s still more work to be done, but that will depend on how well the company can create step change efficiencies.”
Mr Woolford predicts profit margins in Woolworths’ food and liquor business, which peaked at 8 per cent in the 2014-15 financial year, will drop to 6.2 per cent. “That drop in margin reflects both the need to lower their prices and a need to increase staffing,” he said.
“Woolworths has to improve their execution as well as their price perception in the market, so there are many changes that need to be made.”
frank.chung@news.com.au
Originally published as Big changes coming to