Woolworths is to roll out a suuply chain overhaul.
Woolworths is to roll out a suuply chain overhaul.
Woolworths may be on the cusp of a new era of earnings growth, fuelled by cost savings and the use of big data and online shopping to drive customer loyalty.
Australia's largest retailer is preparing to roll out a $1 billion supply chain overhaul, Mercury II, which will slash the cost of transporting groceries and general merchandise across the country, delivering productivity gains similar to those of the Mercury I program almost 10 years ago.
Woolworths is also using its 50 per cent stake in data analytics company Quantium and information about consumer shopping habits gleaned from credit cards and loyalty cards to better identify growth opportunities for all its divisions, both online and in store.
The retailer is also believed to be planning to tweak its Everyday Rewards program to improve customer loyalty, including signing up new partners and shifting the focus away from Qantas Frequent Flyer points to immediate rewards such as shopping vouchers.

Credit Suisse believes Woolworths' earnings growth could accelerate from about 6 per cent in 2014 to 10 per cent or 11 per cent over the next five years, as the retailer leverages its investments in big data and the supply chain to gain market share in food and non-food markets.While several analysts trimmed growth forecasts after Woolworths' annual results last month, citing margin pressure and increased competition from Aldi and Coles, other brokers have increased their forecasts after meeting management during investor roadshows over the past few weeks.
"Supply chain and big data development is likely to enable Woolworths to simultaneously increase technology and scale advantages in food and to leverage its scale in food into a competitive advantage in non-food," Credit Suisse analyst Grant Saligari said on Wednesday.
Credit Suisse said Woolworths' earnings growth could rise to 10.7 per cent if sales rose 2 percentage points faster than the broader market and if costs were cut by 90 basis points.
It also sees scope for Woolworths to grow its share of the $75 billion non-food market by integrating supply chains and systems in food, liquor and general merchandise.
Later this year Woolworths will launch a new group-wide merchandise system, Galaxy, which has been in development for the past few years. The system will reduce costs by, for example, enabling Big W to source stock from Woolworths' warehouses.
Woolworths has not publicly valued the savings from Mercury II but says sales growth and cost control will underpin future earnings growth.
In another report, Deutsche Bank played down concerns that the Australian grocery market was heading in the same direction as its British counterpart, and that Woolworths and Coles' margins would suffer as they lost market share to discounter Aldi.
"There are a number of differences between the two markets and Australia's more favourable structure should allow both Coles and Woolworths to gain market share for another five to 10 years," Deutsche Bank analyst Michael Simotas said.
Analysts say Woolworths also stands to benefit if trading hours are deregulated and restrictions on the sale of alcohol and planning and zoning are eased, in line with recommendations in the Harper competition law review.