Why Grocery Needed a Marketplace Model
In 2015, online grocery was nascent. Coles, Australia's largest supermarket chain with 800+ physical stores, faced a strategic challenge: how to compete with Amazon Fresh and emerging online-only grocery players without the capital investment and complexity of building a dedicated ecommerce platform and fulfillment infrastructure.
The conventional approach: build proprietary infrastructure, own the inventory, manage delivery. This was capital-intensive and required years to develop. There was a better way.
The Marketplace Thesis for Grocery
A marketplace model for grocery offered unique advantages:
- Inventory Without Capital: Traditional grocery ecommerce requires significant inventory investment. Suppliers and producers could take inventory risk; Coles becomes a platform orchestrating supply.
- Leverage Existing Store Footprint: 800+ physical Coles stores could become fulfillment nodes (dark stores) rather than mere inventory warehouses. This turned existing real estate into ecommerce advantage.
- Category Expansion: Marketplace sellers could bring categories Coles didn't carry (specialty foods, organic, international brands) without Coles taking inventory risk.
- Supplier Productivity: Farmers, producers, and specialty vendors could reach customers directly through Coles' platform, commanding better pricing.
- Last-Mile Economics: Grocery is margin-thin and last-mile heavy. Consolidating orders across multiple sellers and delivery partners reduces per-order fulfillment cost.
The eBay Opportunity
Coles had opportunity to partner with eBay, which was expanding into new categories beyond traditional auction/fixed-price items. The thesis: eBay brings 100+ million active buyers globally; Coles brings grocery expertise, seller relationships, and fulfillment infrastructure. Together, they could own grocery on eBay.
This was bold. eBay had never operated a grocery marketplace. No one had. We'd be writing the playbook.
The Strategic Case for eBay
Choosing eBay as the platform partner was not obvious. Coles could have built proprietary infrastructure, partnered with Amazon, or leveraged existing local platforms. Why eBay?
Platform Economics and Reach
eBay offered several advantages: global reach (100+ million active buyers), established seller infrastructure and tools, a reputation for trust, and a payment system already built for high-volume transactions. More importantly, eBay was hungry for new categories and willing to co-invest in a partnership with an enterprise brand like Coles.
Strategic Alignment
eBay and Coles had complementary strengths. eBay brought platform technology, buyer reach, and marketplace operations expertise. Coles brought seller relationships, grocery domain knowledge, logistics infrastructure, and regulatory expertise (grocery is heavily regulated in most markets).
Neither could have built a world-class grocery marketplace alone. Together, they could.
Avoiding the Amazon Trap
Coles considered partnering with Amazon. Amazon Fresh existed, but it was still growing and not yet dominant in Australia. However, partnering with Amazon meant playing by Amazon's rules: high take-rates, loss of direct customer relationship, and dependency on Amazon's roadmap. By choosing eBay, Coles retained more strategic autonomy and could shape the platform's grocery evolution.
Partnership Negotiation and Stakeholder Alignment
Announcing a multimillion-dollar partnership between Coles and eBay required alignment across multiple organizations and, critically, across Coles' own complex internal structure.
The Coles Stakeholder Ecosystem
Coles is not a monolithic organization. To execute the partnership, we needed buy-in from:
- C-Level Leadership (CEO, CFO, Chief Commercial Officer): Strategic vision, budget allocation, long-term commitment.
- Store Operations (800+ store managers and regional directors): Stores become fulfillment nodes. Store managers need to staff, coordinate with ecommerce, manage inventory.
- Logistics and Supply Chain: New delivery partners (UberEATS, Airtasker, Deliveroo), new fulfillment workflows, last-mile coordination.
- Category Management and Buying: Which categories to launch? Which suppliers to onboard? How to handle in-store vs. marketplace inventory?
- Finance and Risk: Capital requirements, take-rate splits, liability for delivery partners, regulatory risk.
- IT and Security: Systems integration, data flows between Coles and eBay, security and compliance.
Negotiating With Store Operations
This was the hardest part. Store managers already had day jobs: running stores, managing staff, hitting sales targets. Now we were asking them to pick and pack ecommerce orders in their spare capacity.
We had to make the value proposition clear:
- Incremental revenue without incremental store square footage
- Opportunity to hire part-time staff specifically for ecommerce fulfillment
- Tools to manage ecommerce inventory separately from in-store inventory
- Clear fulfillment standards and expectations
- Support from a dedicated ecommerce team when things break
We rolled out a pilot in 20 stores before scaling to 800. Pilot results were critical: store managers saw that ecommerce could work without disrupting core operations. That proof of concept unlocked organizational buy-in.
Dark Store Strategy
We realized that running ecommerce out of busy consumer-facing stores had fundamental limits. Customers walking aisles while staff picked ecommerce orders created tension. So we introduced "dark stores"—dedicated fulfillment facilities without consumer-facing retail. These operated like small warehouses, picking and packing ecommerce orders exclusively.
Dark stores were more efficient (lower labor cost, optimized layout for picking) but required separate locations and inventory. The trade-off was worth it in high-density areas where ecommerce demand was strong.
Cross-Functional Organizational Structure
Executing a partnership of this complexity requires disciplined organizational structure. We didn't build this all at once. Instead, we scaled the team as the partnership grew.
Initial Core Team (Launch Phase)
To get the partnership off the ground, we built a lean core team:
- Coles-eBay Partnership Lead (1 person): P&L accountability for partnership. Reported to Coles CMO and eBay Partnership Executive. Removed blockers, made trade-off calls.
- Product Managers (3 people): Buyer experience (search, browse, checkout), seller experience (onboarding, operations), and operations (fulfillment, delivery).
- Category/Range Managers (2 people): Which categories to launch, which suppliers to onboard, pricing strategy.
- Logistics Lead (1 person): Coordinate with dark stores, delivery partners, last-mile logistics.
- Business Development/Partnerships (1 person): Recruit delivery partners (UberEATS, Airtasker, Deliveroo), negotiate deals.
- Engineering (Shared resource from eBay and Coles IT): Systems integration, APIs, data flows between Coles systems and eBay platform.
Scaled Team (Operations Phase)
As we grew from pilot to 800+ stores, the team expanded significantly:
- Store Operations Coordinators (10+ people): One per region, responsible for liaising with store managers, troubleshooting fulfillment issues, coaching on ecommerce best practices.
- Dark Store Managers (5+ people): Each managing a dedicated dark store fulfillment facility.
- Seller Support (5+ people): Handling seller onboarding, training, support, issue resolution.
- Data and Analytics (2-3 people): Tracking fulfillment metrics, delivery performance, inventory accuracy.
- Expanded Product and Engineering: Larger teams building new features, improving fulfillment workflows, optimizing search and discovery.
Cross-Functional Governance
With 20+ full-time team members plus extended stakeholders (store managers, delivery partners, finance, compliance), clear governance was essential. We established:
- Weekly Partnership Standup (60 minutes): All core team leads. Blockers, metrics, seller/store issues.
- Bi-Weekly Stakeholder Sync (90 minutes): Coles (store operations, supply chain, finance, IT) + eBay leadership. Strategic issues, budget, decisions.
- Monthly Store Manager Forum (60 minutes, rotating regions): Direct feedback from store managers. What's working, what's broken, how to support better.
- Quarterly Partnership Governance Board (120 minutes): C-level and eBay leadership. Quarterly P&L, strategic pivots, long-term roadmap.
Execution Framework at Scale
Scaling from a pilot of 20 stores to 800+ stores required a systematic playbook. We learned quickly that ad-hoc execution doesn't scale.
Phased Rollout Strategy
Rather than going live across all stores simultaneously (which would have been chaotic), we rolled out in phases:
- Phase 1 (Weeks 1-12): 20-store pilot in Sydney and Melbourne. Learn what works, identify blockers, refine playbook.
- Phase 2 (Weeks 13-26): Expand to 100 stores across major metro areas. Train store teams at scale, establish operations norms.
- Phase 3 (Weeks 27-52): Roll out to 400+ stores including regional stores. Adapt processes for smaller stores and lower-volume areas.
- Phase 4 (Months 13-18): Remaining stores and optimization. Focus on improving fulfillment speed, accuracy, and margins.
Store Readiness and Training
Before each phase, we conducted store readiness assessments:
- Physical assessment: sufficient space for picking/packing, cold storage for perishables, access for delivery partners.
- Staffing assessment: manager commitment, team capacity, ability to allocate staff to ecommerce.
- Systems readiness: POS systems, inventory management, barcode/RFID infrastructure.
- Training: all staff involved in ecommerce (pickers, packers, customer service) trained on processes, tools, quality standards.
Quality and Accuracy Standards
Quality is existential for grocery ecommerce. A wrong item or stale product damages customer trust. We established strict quality standards:
- Accuracy Target: 99%+ order accuracy. Every item in the order is correct, not substituted.
- Freshness Target: Perishables meet freshness standards. Expiry dates exceed customer expectations.
- Cleanliness and Presentation: Orders packed professionally, no damage during fulfillment or delivery.
- Speed Target: Orders picked and packed within 2 hours of placement, ready for delivery partner pickup.
We tracked these metrics per store and per delivery partner. Stores that underperformed got additional training and support. Delivery partners that failed freshness standards were remediated or replaced.
Dark Store Operations and Range Management
Dark stores—dedicated fulfillment facilities—became a critical part of our strategy in high-density areas. These facilities operated differently from traditional stores and required new operational models.
Dark Store Economics
The case for dark stores was straightforward economics:
- Labor Efficiency: Picking a grocery order in a dark store (optimized layout, no customer shopping) took 25-30 minutes. In a consumer-facing store, it took 45-60 minutes (navigating customer crowds, managing shelf availability). Efficiency gain of 40-50%.
- Inventory Flexibility: Dark stores could maintain separate inventory optimized for ecommerce (popular SKUs, bulk items, niche products). Store inventory remained optimized for in-store customers.
- Throughput: A dark store could handle 50-80 orders per day with 5-8 staff. A consumer-facing store could handle 15-20 orders while managing consumer operations.
- Margin: Higher throughput + lower cost per order made dark store unit economics stronger than store-based fulfillment.
Site Selection and Location Strategy
We didn't put dark stores everywhere. We used data-driven site selection:
- Demand Clustering: Where are ecommerce orders concentrating? Which postcodes are high-demand?
- Delivery Partner Density: Where are UberEATS, Airtasker, and Deliveroo drivers clustered? Dark stores should be near delivery partner hubs for short, profitable delivery legs.
- Real Estate Availability: What warehouse space is available, affordable, and in the right location? Not every high-demand area had suitable real estate.
- Cannibalization Risk: Would a dark store cannibalize nearby consumer-facing stores' ecommerce? We evaluated this and accepted minimal cannibalization in exchange for better fulfillment efficiency.
Range and Merchandising in Dark Stores
Dark store inventory was curated differently from consumer-facing stores:
- Popular SKUs Over-Stocked: Best-selling items (staples, popular brands) were stocked at higher levels. If an order wanted bread, we always had it.
- Niche Products Included: Specialty brands, organic products, dietary-specific items that Coles consumer stores couldn't stock economically were available in dark stores because they drove higher ecommerce demand.
- Bulk and Value Sizes: Large packs suitable for families or heavy users. Consumers shopping ecommerce tend to buy in bulk (less frequent shopping).
- Substitution Policies: When an item was out of stock, what could we substitute? We trained pickers on smart substitutions: if customer wants full-cream milk and we're out, substitute full-cream milk from another brand, not skim milk.
Supply Chain to Dark Stores
Dark stores needed inventory replenishment, which required new logistics flows:
- Direct from Suppliers: High-volume items (bread, milk, beverages) came directly from suppliers to dark stores, bypassing distribution centers. This reduced cost and improved freshness.
- From Regional Distribution Centers: Most products came from existing Coles distribution centers, with dedicated routes to dark stores every 1-2 days.
- Backstock From Nearby Stores: If a dark store was out of an item and demand was urgent, nearby consumer stores could provide backstock. This required coordination but improved fill rates.
Delivery Logistics and Last-Mile Optimization
Grocery ecommerce lives or dies on last-mile delivery. A great product, perfectly picked, delivered late or cold fails the customer. Last-mile logistics was our highest-leverage optimization area.
Multi-Partner Delivery Model
We didn't build proprietary delivery infrastructure. Instead, we partnered with existing delivery platforms:
- UberEATS: Urban, high-density delivery. Bikes, scooters, cars. Good for fast delivery (30-60 minutes) in metro areas. Premium pricing but high customer satisfaction.
- Airtasker: General on-demand task marketplace. Flexible capacity, cheaper than Uber for scheduled deliveries. Good for same-day, non-urgent orders.
- Deliveroo: Restaurant delivery network expanding into grocery. Good capacity in some metro areas, complementary to other partners.
Why multiple partners? To reduce dependency, optimize for different customer segments and order profiles, and drive competition on pricing and service quality.
Delivery Performance Metrics
We tracked delivery quality obsessively:
- On-Time Delivery Rate: % of orders delivered within promised time window. Target: 95%+.
- Freshness on Delivery: Are perishables still fresh when delivered? Tracked through customer feedback and partner data.
- Damage Rate: % of orders with damage during delivery. Target: < 2%.
- Cost per Order: Delivery partner fee per order. We negotiated volume-based discounts, targeting 35% reduction in delivery cost per order.
- Customer Satisfaction (NPS): Customer satisfaction with delivery experience. We wanted delivery to be a highlight, not a pain point.
Delivery Optimization Tactics
To improve delivery metrics, we employed several tactics:
- Order Batching: Group orders heading to the same area or zip code. Instead of one delivery driver per order, batch 3-5 orders per driver route. Reduces cost 30-40%.
- Scheduled vs. Immediate Delivery: Offer customers choice between ASAP delivery (premium price, UberEATS) and scheduled delivery 24-48 hours (discounted, other partners). Most customers chose scheduled; we optimized for this.
- Delivery Partner Training: Grocery is different from restaurant delivery. We trained delivery partners on handling fresh/cold items, the importance of speed for perishables, and customer communication.
- Route Planning and Forecasting: Machine learning to predict which areas would have high demand, positioning delivery partner fleets accordingly.
Cold Chain Management
Keeping perishables fresh during picking, packing, and delivery was critical:
- Cold Storage at Facilities: Adequate refrigeration in dark stores and fulfillment areas. Temperature-controlled zones for different product types (frozen, chilled, ambient).
- Packing Strategy: Insulated boxes, ice packs for long deliveries. Cold items packed together, separated from ambient items.
- Delivery Vehicle Temperature Control: Refrigerated vehicles for longer routes. Standard vehicles with ice packs for short urban routes.
- Speed: Minimize time between fulfillment and customer delivery. The faster the delivery, the less cold chain management matters.
Technical Integration and Data Flows
Coles and eBay had very different technical architectures. Integrating them seamlessly was a major engineering challenge.
Data Flow Architecture
Orders and inventory data flowed between systems continuously:
- Product Catalog: Coles product data (SKU, attributes, images) flowed to eBay platform. eBay merchandisers applied pricing, promotions, search optimization.
- Inventory Sync: Real-time inventory levels from Coles systems to eBay. When a item sold on eBay, Coles inventory was decremented. When inventory came in at a dark store, eBay inventory was incremented.
- Order Management: Orders placed on eBay flowed to Coles fulfillment systems. Stores/dark stores picked and packed. Shipment data flowed back to eBay, then to delivery partners.
- Payment and Reconciliation: eBay collected payment from customer. Coles received payout, net of eBay take-rate and delivery partner fees.
API Design and Integration Points
We designed APIs for key integration points:
- Catalog API: Coles uploads product data (JSON format). eBay ingests, validates, and makes live. Supports bulk uploads and real-time updates.
- Inventory API: Coles WMS (warehouse management system) publishes real-time inventory changes. eBay subscribes and updates availability and fulfillment promise.
- Order API: eBay publishes orders as JSON events. Coles fulfillment system consumes, maps to internal formats, triggers picking/packing.
- Tracking API: Coles publishes tracking events (picked, packed, handed to delivery partner, in transit, delivered). eBay displays to customer.
Testing and Quality Assurance
Integrations between complex systems fail in subtle ways. We had rigorous testing:
- Unit Testing: Each API endpoint tested independently with mock data.
- Integration Testing: End-to-end flows (order → fulfillment → delivery → tracking) tested in staging environment mirroring production.
- Load Testing: Simulated Black Friday/holiday spikes. Would the APIs handle 10x normal volume?
- Disaster Recovery: What if Coles systems go down? What if eBay is unavailable? How do we recover gracefully without losing data?
- Monitoring and Alerting: Production monitoring for API latency, error rates, data freshness. Automated alerts for degradation.
Governance and Change Management
Changes to APIs or integrations could break things. We had strict governance:
- Change Advisory Board: Representatives from Coles and eBay review all API changes. Impact assessment: who depends on this change? What breaks?
- Backward Compatibility: Old API versions stay available during transition. Consumers of APIs have time to upgrade without disruption.
- Release Windows: High-risk changes released in low-traffic windows (off-peak hours, not holidays). Immediate rollback capability if needed.
Results and Key Learnings
The Coles-eBay grocery marketplace became the world's first—and, initially, only—grocery marketplace on eBay. The results were significant, though executing at this scale was harder than anticipated.
Scale and Growth
- 800+ Participating Stores: Within 18 months, we had integrated all major Coles stores, plus dedicated dark stores in high-demand areas.
- 600+ Seller Partners: Not just Coles store inventory. We onboarded specialty producers, organic farms, and other suppliers, adding breadth to the marketplace.
- Millions of SKUs: Product diversity on Coles-eBay grocery marketplace exceeded what any single Coles store could stock.
Operational Excellence
- 99.2% Order Accuracy: Exceeded our 99%+ target. Continuous improvement in picking and packing processes drove high accuracy.
- 95%+ On-Time Delivery: Despite challenges with delivery partners, we hit our on-time target. Multi-partner strategy and order batching drove efficiency.
- 35% Delivery Cost Reduction: Aggressive optimization of delivery partner economics and route planning achieved the target.
Financial Performance
- $1.1B P&L Expansion: Coles' ecommerce footprint expanded from a small pilot to meaningful GMV contribution to the $1.1B P&L that included the grocery marketplace.
- Margin Improvement: Marketplace take-rate and reduced delivery costs drove better margins than traditional Coles ecommerce model.
- Customer Lifetime Value Growth: Repeat purchase rates on marketplace were 2.5x higher than traditional Coles ecommerce, indicating stronger customer retention.
Key Learnings
- Organizational Alignment is Non-Negotiable: A partnership this complex requires alignment across 50+ people, multiple organizations, and complex stakeholders. Clear governance and communication are existential.
- Phased Rollout Beats Big-Bang: Learning in a 20-store pilot prevented massive mistakes when we scaled to 800 stores. Speed matters, but not at the expense of quality.
- Multi-Partner Delivery is Optimal: Building proprietary delivery would have been slower and more expensive. Partnering with UberEATS, Airtasker, and Deliveroo gave us flexibility and competitive pricing.
- Dark Stores are Transformational for Grocery: 40-50% improvement in picking efficiency and ability to optimize inventory made dark stores a critical lever for margin and customer experience.
- Data Integration is Complex but Solvable: Clear API design, rigorous testing, and strong change governance prevented most integration failures. The few that happened were caught and resolved quickly.
Concluding Thoughts
Launching the world's first grocery marketplace on eBay was ambitious, risky, and ultimately successful. It required organizational alignment across two large, complex organizations; operational excellence in store execution and logistics; and technical discipline in systems integration.
The playbook—phased rollout, multi-partner delivery, dark stores, clear governance, data-driven optimization—is replicable for other large retail or grocery companies considering similar transformations.
For Coles, the partnership with eBay unlocked exponential growth in ecommerce that would have taken years to build internally. For eBay, grocery became a new category and Coles became a strategic partner and proof-of-concept for enterprise marketplace operations.