Coles’ game-changing loyalty plan
COLES is set to launch a new front to its loyalty program that could give it the edge over a resurgent Woolworths in the supermarket wars.
A retail watcher has told news.com.au it's a "smart move" which also takes aim at United States giant Amazon in a bid to dent its Australian rollout
Called Flybuys Max, the new program will see shoppers given 5 per cent off all fresh produce and free delivery on online purchases in return for a $10 monthly or $99 annual fee. Coles currently charges between $4 and $18 for online delivery.
Flybuys Max subscribers are also able to get cheap movie and theme park tickets and even access an online film streaming service.
Woolworths offers a service called Delivery Saver that costs the same, or even less, but only kicks into free delivery mode if a customer spends more than $100 in a single transaction. There are also no extra offers such as money off products.
Coles, which is currently in the process of being split off from parent company Wesfarmers, confirmed to news.com.au the existence of Flybuys Max but said it was a currently a "trial" and there was no firm rollout date.
Flybuys general manager Alex Chruszcz said the feedback had been "very positive" from the customers who had tried it but the final offers might change.
"Flybuys Max has been developed to offer members a range of compelling long-term benefits they want like discounts on fresh food, movie tickets and theme parks, free Coles Online delivery, bonus Flybuys points at Coles Express and online video streaming.
"It's currently being tested with a small group of members so that we have the best possible offers available when it rolls out nationally."
A report released this week by investment bank UBS found customers were paying less attention to in-store promotions; but, on the flip side, loyalty programs were now the second biggest drivers of trips to stores. The survey of 1100 shoppers found Coles' Flybuys program was viewed as having improved the most.
Gary Mortimer, a professor of marketing at Queensland University of Technology, said Flybuys Max would chiefly benefit those customers who regularly did their food shopping online, a market worth more than $3bn a year.
"It's a smart move getting ahead of the game and it really is the first move Coles has made ahead of Woolworths for the last couple of years.
"Online shopping represents around 3 per cent of total food and grocery sales, so while it's still a small proportion of the market, it's certainly growing as more and more people choose this particular channel."
In recent years, Woolworths has pulled ahead of Coles in the battle for customers. In May, Woolies posted comparable sales growth of 4.4 per cent while Coles' sales increased by just 0.9 per cent.
But Prof Mortimer said Coles' larger rival would see Flybuys Max as a threat.
"I imagine Woolworths will be very, very quick to do something similar," he said.
In other areas, Coles is playing catch up to its major competitor. Woolworths recently opened its 50th Metro branded smaller store in Sydney with a revised format with a focus on hot and cold food to eat immediately or heat up at home. Coles isn't planning on launching its first smaller store until later this year.
The simplicity of the service over traditional loyalty programs could also mean it would be a winner, he said.
"One of the criticisms of traditional loyalty programs has been points fatigue, where people collect points but generally don't know how many they have at any given time. But this is very simplified with immediate benefits which is a good offer."
Flybuys Max has huge similarities to Amazon's Prime service which for $6.99 a month offers free and fast delivery on many items as well as access to the US giant's streaming service.
Coles won't be unaware that in the states, Amazon is increasingly muscling on the grocery market both online and in store. It now owns the Whole Food Market supermarket chain that operates in the US and United Kingdom.
Wesfarmers revealed further details of its sell-off of the Coles chain earlier this week. The company aims to list Coles as an independent company in November with the Perth based conglomerate retaining a 15 per cent stake as well as the Kmart, Target and Bunnings chains.
Wesfarmers will also hold on to 50 per cent of Flybuys meaning if the new loyalty initiative is a success, the company will continue to benefit even though it no longer owns Coles.