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Online part of Co-operative strategy to broaden access to its services

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The Co-operative Group says it is succeeding in building a “compelling” online retail presence for its electricals and pharmacy businesses.

The internet strategy is part of a push by the group, which this week announced its half-year results, to improve customer access to its broad range of services, which also extend to funerals, food, cars, banking and an expanding legal services business.

In its half-year results the company said: “We are building a compelling co-operative online retailing presence, which builds on our strengths of great customer service, value for money and trust within our existing electrical and pharmacy online businesses.”

It also said it was continuing to work on Project Unity in order to “realise the full potential of our vast and diverse customer base and our strong family of businesses, in the interests of our customers and members.”

In addition to selling pharmacy and electricals products online, the company is also taking both banking and electricals services into its food stores, with a national roll out following pilots. Legal services will be extended through its bank branches, while its banking services, which already include online and mobile banking, will extend to mobile and contactless payments. The Co-op said it would spend £2bn in the next three years across its businesses on people, processes and systems.

Chief executive Peter Marks said such moves would help prepare it for a future recovery in the economy. “The environment is tough and we see no let-up in that,” he said. “But we believe that the work we have done over the past five years to scale up in our core businesses means we are better placed than ever before to thrive when the economic upturn does come.”

In the six months to June 30, Co-operative Group gross sales, including VAT, rose to £6.56bn from ££6.54bn last time. But underlying operating profit fell to £174m from £264m last time, while debt increased to £1.5bn from £1.4bn.

Sales in the company’s food division fell by 2.2% overall, and 1.2% on a like-for-like basis. Like-for-like sales rose by 1.4% in its convenience stores. The company said it would open 80 new stores this year and was rolling out its SMART stock management system to improve product availability.

But its specialist businesses, which include the electricals and pharmacy online businesses, saw revenue grow by 1.5% to £777.1m and underlying operating profit grow by 19.3% to £62.0m.

Marks said: “It is in times like these when our ownership model as a mutual really comes into its own. We have been able to continue to invest for the long-term development of all our businesses and to protect our customers even though we, like all businesses, have felt the impact of the tough headwinds of the unrelenting consumer downturn.

“A year ago I warned that we were operating in the worst conditions that I have seen in more than 40 years in business. The results we are announcing today show the full impact of that with the profitability of our two biggest businesses affected. The impact has been felt most keenly in our bank which has been hit by increased impairments on lending to corporate customers and the on-going low-interest-rate environment. On a positive note however, our specialist businesses division continues to perform well and saw a strong increase in profitability in the first half.

“None of this was unexpected and we had planned for this outcome, so were well prepared. And the current environment only highlights again the strength of our ownership model that lets us plan for the longer term by continuing to invest to ensure our businesses maintain momentum and our customers are always offered value with values.

“Looking ahead, we remain confident and we expect an improvement in sales and profit in the second half.”

Maginus , a provider of multichannel systems to retail and distribution companies, developed the ecommerce web sites for both Co-Operative Electrical and Co-Operative Pharmacy.

Mark Thornton, Maginus’ director of ecommerce, said: “It’s a real testament to us to see the Co-operative Group going from strength to strength online. Our relationship with the group goes back a number of years and this is now the third iteration of Microsoft technologies that we have deployed to support the ecommerce requirements of the group – the first being with Electrical Shop in 2004 and the latest being with Pharmacy in May last year. Whilst the Electrical Shop has been an online retailer from the outset, the implementation with pharmacy was originally developed to provide an online prescription capability and has since grown in to a full online retail web site.”

The current ecommerce solutions are based upon the Microsoft .Net technology coupled with EPiServer CMS .

Our view: With the Co-op now offering online and mobile banking, pharmacy and electrical sales, the largest missing piece of the connected jigsaw would seem to be the food division. Some 350 of the Co-op’s larger stores do offer home delivery for goods bought in store. With Iceland now planning a return to ecommerce sales as more of its customers now have internet access, we’ll wait with interest to see if (or, indeed, when) the UK’s fifth largest food retailer will join the online grocery revolution.

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