Wesfarmers believes investments aimed at boosting its digital capabilities are on track with its expectations, as the company launches its new digital membership channel OnePass.
Responding to questions from analysts and investors during its Strategy Briefing Day, Wesfarmers CEO Rob Scott said he’s “comfortable with the investment we're making”.
Wesfarmers recently introduced its members program OnePass which combines Kmart, Target and Catch.com.au under one digital store with more partner stores expected to follow.
OnePass is led by former Australia Post executive general manager Nicole Sheffield in the newly created role of managing director for its digital and digital development team, called Wesfarmers OneDigital.
In Wesfarmers 2021 full-year results, the company expected its operating expenditure to reach $100 million dollars across the next 12 months to support this initiative.
Scott said the $100 million was “not a run rate” but that the cost “is relation to set up costs, in relation to launch costs.”
“What we're developing with OnePass is a more seamless subscription program across all of our retail businesses, both online and in store.
“No one does that in Australia. There is no precedent in Australia so we are the first to do this. That is quite a unique opportunity."
Scott added the initial start-up costs “require a fair bit of investment” however “there's not a lot of downside around the investment we're making.”
“Once we get through the heavy lifting around this investment and the launch, we will have delivered a far more seamless shopping experience across all of our digital channels, all of our retail stores … whilst making it a far more seamless experience for customers and being able to leverage the customer data across the group.”
Continuing, Scott said he expects costs to come down over time as its digital investments begin to yield savings.
“Over time the economic model will be such that we will clearly be generating incremental profits … and I would expect the net cost of the investment to decrease over time.”
Scott said “time till tell” what future costs will be however he emphasised “the $100 million is very much around an investment, a setup, a launch investment”.
“At the end of the day, what drives us is creating value at a group level. We're not going to get into an overly complex process of try to split out [costs].”
“We'll know because we'll monitor it. But we're not going to be reporting separately what the incremental value that came out as generated from OnePass or OneDigital, but we will be monitoring that very, very closely.”
While Wesfarmers expects some recurring costs it will “certainly not at the level that we're seeing through the investment phase.”