Contrary to what some analysts are writing, buying a broken business from Coles is not the path to disaster. The Myer example demonstrates that with the right culture and leadership, retail businesses can be put quickly on the path to fun and profit.

The eyes of the Wesfarmers people are well and truly open. During the due diligence process, they found pretty much what they expected, and a few things they describe as bizarre. They had a very clear picture of the magnitude of the task well before this week’s results announcement.

Analysts tend to see retail in the simplest form. They see Coles about to lock horns in an unwinnable price war with Woolworths. Because Woolworths has an efficiency jump on Coles, the analysts are already calling the result.

While all retail offers will degrade to being price driven unless they are lifted to another level, price is only one of five things a retailer can offer. Few of us buy a car, a haircut or healthcare on price alone. Other important elements in the retail offer are service, range, location and the experience, and analysts tend not to understand these.

Many argue that Coles has superior locations to Woolworths. Once the Coles workplace culture is repaired, they will be in a better position to engage with their customers and provide a better experience, reducing the importance of price.

Let me give an example. Today’s Fin shows the price of coffee at US$1.34 a pound. It is a commodity costing less than 4c a cup. When roasted, ground and vacuum packed, it becomes goods, but it’s still less than 20c a cup. Add hot water and put it in a cup, coffee might be $2 — and those beans have become a service.

Let’s put the coffee through the machine that makes the sqqwwoooshshing noise in a Fitzroy or Darlinghurst café. It has started to become an experience and those 4c beans are now selling for $4.

Take yourself to St Marks square in Venice and the Caffé Florian. You sit there, drinking their coffee, steeping yourself in the most old world of old world cities. When you get the bill, you realise you have just paid $20 for 4c worth of beans. But what you bought was the experience — and you love it so much that you dine out on the story for six months.

I doubt if Coles can become Caffe Florian, but by being in the right locations, improving the service and providing customers with a more engaging experience, they can compete very nicely with the big green rival.

Disclosures: My company Orex has recruited managers for Bunnings, Myer and recently for a Coles company. My wife owns Coles shares.

Rob Lake publishes Brandish – a newsletter about retail intelligence.