Online growth a new KPI for Coles executives

Sue MitchellColumnist

Sep 24, 2020 – 12.31pm

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Coles will take into account online sales growth in determining bonuses for senior executives, underlining the growing importance of e-commerce as more consumers buy their food and liquor online.

Coles is tweaking the way it measures the performance of its leadership team, introducing an online sales metric to its short-term incentive scheme. The online metric will replace a cash realisation metric for all executives apart from Coles' chief financial officer.

"This shift demonstrates the importance of growth in the online channel to achieving our strategic goals," Richard Freudenstein, the chairman of Coles' people and culture committee, said in the annual report. released on Thursday.

Coles is adding an online sales metric to its short-term incentive scheme for senior executives.

In addition, a blended customer metric will change to a single net promoter score metric, which measures customer experience and is usually a reliable predictor of sales growth.

"This simplifies the measurement and highlights the importance of going beyond merely satisfying our customers to recruiting them as advocates for our business," Mr Freudenstein said.

Coles' online grocery sales rose 18.1 per cent in 2020 and would have been higher if the retailer hadn't had to temporarily suspend services in March and April to prioritise deliveries to vulnerable customers amid overwhelming demand. Coles subsequently doubled its online capacity by expanding its click-and-collect and car boot services.

In the first six weeks of 2020-21, online food sales soared 60 per cent, fuelled by demand from locked down consumers in Victoria, and online penetration rate rose to 6 per cent from a 2019-20 exit rate of 4 per cent.

Coles' online food business made a modest profit in 2020 but profitability is expected to improve once two centralised fulfilment centres being built by online grocery company Ocado are completed in 2023.

According to the annual report, Coles' senior executives received between 92 per cent and 100 per cent of the maximum incentives they could have earned under the short-term incentive scheme after meeting or exceeding their performance targets.

Coles managing director Steven Cain's total remuneration rose $1.6 million to $6.96 million and included a base salary of $2.06 million ($1.8 million in 2019), a cash bonus of $1.24 million (compared with $822,314), and $2.1 million in share-based payments (compared with $319,110 ).

Mr Cain also received $1.5 million in the final tranche of a $3.9 million payment to compensate him for short and long-term incentives forfeited or forgone with his prior employer, Metcash, when he took the top job at Coles.

In comparison, Mr Cain's former boss, Wesfarmers managing director Rob Scott's total remuneration rose to $7.76 million from $6.75 million, with $5.2 million in stock-based rewards offsetting the absence of a short term cash bonus after the group failed to reach certain financial targets.

Sue Mitchell writes the fortnightly Window Shopping column for the Financial Review and has covered retailing for over 30 years. Connect with Sue on Twitter. Email Sue at smitchell2045@gmail.com