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Coles share price up after delivery subscription service announced

As Australian supermarkets aggressively push into digital spaces, we take a look at the latest home delivery subscription service from Coles.

Coles new subscription service in focus Source: Bloomberg

Is Coles set to become a ‘Netflix of food’? After all, one gets the creeping sense that everything is being turned into a subscription these days.

When the Australian supermarket chain reported its Q1 results last month – overall sales revenue was sluggish – rising just 1.6% on a year-over-year basis.

Here, Coles posted first quarter sales revenue of $7,705 million – on comparable sales growth of just 0.1%.

More recently, the supermarket’s share price has risen almost 3% after it was announced that it would launch a subscription-based delivery service.

Coles share price: new ventures

Though overall revenue growth was sluggish, Coles posted strong online sales growth for the quarter – with online sales climbing 23.5%.

'Click & Collect remains the fastest growing channel for online and is now available in all states.'

The Coles management team further pointed out that:

‘Growth continues in the online channel with planned website upgrades expected to land through the remainder of FY20. An extension of the UberEats trial from Supermarkets into Liquor also commenced during the quarter which improved the convenience offer for customers.'

Another digital growth lever

Likely looking to capitalise on the growth of their click and collect program, Coles has just recently announced a tiered monthly home delivery service. Such a service bears many resemblances to the subscription model popularised by Netflix and subsequently adopted by many other industries.

Like Netflix, signing up to Coles’s online delivery service involves a free month trial, a tiered basic and premium subscription choice, as well as the ability to cancel your subscription at any time.

As Coles further describes it, the:

‘Delivery Plus is a subscription service that covers the cost of home delivery fees and any applicable fees for orders collected at Coles Express. The subscription is valid on purchases from Coles Online when you spend $100 or more in one transaction, after savings and discounts have been applied.’

Under the premium Every Day Saver subscription for example, a user receives unlimited deliveries any day of the week; at a $19.00 per month price point.

The Mid Week Saver subscription package offers much of the same functionality – also allowing unlimited deliveries – though only on Tuesdays, Wednesdays and Thursdays. That option is priced at $14.00 per week.

Speaking of this new approach to home delivery, Coles Online General Manager Karen Donaldson said:

‘Delivery Plus will allow customers who regularly shop online to save hundreds of dollars a year and help them manage their family budget by knowing exactly how much they will pay on Coles Online delivery each month.’

Investors will likely be eager to see if this subscription-based move will bolster Coles's online growth profile even further. Such indicators however are likely to be a few months away at least, when Coles reports their half-year FY20 results to the market.

Year-to-date, the Coles share price is up a little more than 30%.

Practise trading Australian stocks like Coles and Woolworths with an IG demo account now

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