Woolworths kicks off $65m overhaul

WOOLIES has admitted to its mistakes and has $65 million plan to turn it around — starting with dodgy trolleys and bad service.

WOOLWORTHS has admitted it got it wrong by slashing staff hours in a bid to cut costs, resulting in poorly stocked shelves and dismal service, but the supermarket giant claims customers are beginning to see the results of a massive turnaround plan.

Dave Chambers, the new director of Woolworths supermarkets who replaced Tjeerd Jegen in February, told the Australian Financial Review he was shocked by what he saw when he first joined the company, from long queues to trolleys in disrepair.

“Customers were saying service wasn’t good enough and availability wasn’t good enough,” Mr Chambers told the AFR.

But the retailer says its making progress as it rolls out $65 million worth of upgrades to its stores, and now receives daily feedback as part of its “voice of the customer” surveys to quickly address issues.

“We are starting to do better on trolley and baskets and staff attitude,” he said. “Fruit and vegetables and queue time and out-of-stocks are the three areas we have the most opportunity in.”

In its full-year results presentation last month — one of its worst in nearly 20 years as a public company — Woolworths announced it had already reinvested 56,000 staff hours per week across its 950 stores. The company says it now wants to add an extra 63,000 hours in the coming year.

“The real-time feedback we receive from thousands of Woolworths customers each month means we know what store improvements are working and highlights where we can make more,” a Woolworths spokesman told news.com.au.

“For instance we regularly receive positive feedback around our in-store teams’ friendly interaction with customers on the shop floor.

“Customers also tell us that they value good quality trolleys to help them get around the store. This has meant we are now investing in new trolley fleets in hundreds of our supermarkets.”

With sales volumes relatively static in supermarkets — shoppers tend to be the same people buying the same things every week — cutting prices wreaks havoc with profit margins.

To maintain its margins, Woolworths was forced to cut costs. “It means you have to cut a lot of the things people come into the store for beyond price — like people being at the check-out,” said Peter Ryan, retail analyst with Red Communication Australia.

“Woolworths is not a turnaround story, because that suggests they’re in a hole. They’re not — they’re underperforming. They are still getting a degree of growth, but not profitable growth for a business with their opportunity.”

Woolworths’ food and liquor business lifted total sales 2.3 per cent for the year to June, while comparable sales were up just 0.7 per cent. Coles recorded a 5.3 per cent rise in total sales and a 3.9 per cent increase in comparable sales in the same period.

Mr Ryan said Woolworths had “panicked” in the past by trying to slash prices to compete with Coles. “Coles has very carefully chosen loss-leading products to cut to make ‘price statements’. I’m not sure Woolworths has been as clever,” he said.

“You don’t have to be intelligent to be cheap, but you do have to be intelligent to make a profit.”

He added that he was dubious a daily customer survey would be the solution to Woolworths problems. “Any professional retailer can walk the floor of a supermarket and in 20 minutes tell you what needs to be fixed. The problem in the past is management has been disconnected from the shop floor,” he said.

“If the process from here on in is, let’s have lots and lots of surveys, it won’t fix anything.”

Former Coles boss Ian McLeod, who swept in to rescue the floundering retailer in 2007 after its acquisition by Wesfarmers, often gave a presentation where he compared before and after pictures of the Coles storefronts.

“When I arrived here, I looked at the marketplace and felt that the store design was probably 20 years out of date compared with other markets,” he said in 2011.

“I felt there could be a significant improvement in how we presented ourselves to the customer. And that was not just Coles. That was the market in general.”

At the company’s results presentation last month, managing director John Durkan highlighted that 513 stores — or 66 per cent — had been renewed since the takeover in 2007. That works out to more than one a week.

Woolworths must now do a Coles, eight years later.

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