Coles announces new five-year strategic partnership with Microsoft to accelerate efficiency and drive innovation

Coles Group (Coles) and Microsoft today announced a new five-year strategic partnership. The companies will collaborate and co-innovate on a range of digital initiatives to help Coles grow its sales and ecommerce capabilities, increase operational efficiency and enhance customer experiences.

Coles will leverage Microsoft’s cloud, AI and edge computing capabilities to build an AI-as-a-Service platform, modernise its IT estate and unlock more opportunities to use AI and machine learning.

Coles will work closely with Microsoft to deliver a more personalised and consistent shopping experience, using technologies like Azure OpenAI Service. It will also empower and develop customer-focused teams through the use of generative AI copilots.

In addition, the partnership will focus on growing diversified revenue streams for Coles by reaching more ready-to-buy shoppers, increasing the level of personalisation, and capitalising on market insights through its Coles 360 retail media business.

“We are delighted to refresh our longstanding partnership with Microsoft to drive our strategic priorities and create more value for our customers, team members, suppliers and shareholders,” said John Cox, Chief Technology Officer at Coles. “Microsoft’s proven expertise and innovative solutions will help us build the digital foundations and enablers that will empower us in our purpose of helping Australians to live and eat better every day.”

Steven Worrall, managing director, at Microsoft ANZ, said: “We’re thrilled to deepen our partnership with Coles, a true leader in Australian retail. Together, we’ll leverage Microsoft’s cloud, AI and edge computing capabilities to drive meaningful transformation, helping Coles stay ahead in an ever-evolving, customer-first landscape.

This partnership is a great example of how our technology empowers retailers to innovate, grow and deliver exceptional value in a highly competitive market.”

Following are some of the key initiatives that Coles and Microsoft will work on together:

• Building an AI-as-a-Service platform: The platform will enable the safe, secure and responsible rollout of Azure OpenAI use cases across Coles. The first use case, Tell Coles, is a generative AI model that generates customer sentiment insights based on customer feedback surveys and delivers them to store managers to drive on-going improvement in customer experience.
• Expanding Coles’ world-leading edge computing platform: Coles’ ‘Intelligent Edge Backbone (IEB)’ supports computer vision and machine learning outcomes. Coles and Microsoft will co-innovate to explore how the IEB can connect and manage IoT devices across Coles’ supply chain and into stores to advance Coles’ sustainability goals, improve customer experiences, reducing stock loss, and boost team member productivity and safety.
• Enhancing customers’ digital experience: This will be achieved through hyper-personalisation that reflects Coles’ value. With Microsoft Fabric at the core of the Coles Digital Data Platform, machine learning models will provide real-time, individual and family-relevant recommendations consistently across all digital channels. Early plans to leverage AI-as-a-Service (Azure ML) include prototyping a “digital chef” to provide personalised meal solutions, recipes and cooking tips to customers based on their preferences and dietary needs.
• Simplifying tools to drive productivity and targeted customer experiences: Coles will modernise and re-platform tools used by its people to provide simpler, more efficient solutions. This includes building Microsoft Power Apps and Copilot agents that provide team members with real-time, next-best-action insights to increase customer satisfaction and drive productivity.
• Modernising Coles’ data and analytics platform: Coles has established a modern data platform provides richer and faster insights to business users at a lower cost, through data democratisation and streamlining access to both historical and real-time data. Coles already has more than 70 per cent of its data in the cloud and is building use cases off the platform. It provides the business with a self-service environment with reporting tools such as PowerBI enabling Coles to generate targeted insights at scale. It also recently began using Microsoft Power Platform for interactive apps alongside its data and AI platforms. Additionally, Coles plans to use Copilot Studio to extend out-of-the-box copilots such as Copilot for Microsoft 365, Copilot for Power BI, Copilot for Security and GitHub Copilot to deliver data-driven use cases at speed.

“We strive to provide delicious, easy and affordable food and drink to our customers,” said Mr Cox. “I’m excited that our partnership with Microsoft is not only helping us deliver this consistently – from online to instore or through home delivery – but also helping us move beyond the hype around AI so we can use it to delight our customers with enhanced experiences across their customer journey.”

The new five-year agreement builds on Coles and Microsoft’s longstanding relationship, which included a strategic partnership in 2019 and a workplace transformation in 2021.

More recently, Coles and Microsoft used several AI models to develop the retailer’s IEB, which makes 1.6 billion informed predictions each day so customers can find exactly what they are looking for across its 850 stores.

Coles and Microsoft will continue to explore new opportunities and areas of collaboration as part of their long-term strategic partnership.