A year in retail can feel like a long time, particularly for Asda which will be glad this one is over. If losing market share to Sainsburys was bad, then losing sales and customers to the discounters was negligent. Then giving away good retailers in a restructure to contain costs and shore up margin, was just criminal.
The torrent of knee-jerk tactics all centred on price and cost cutting tells you all you really need to know about the leadership vacuum Asda is currently experiencing. Taking a scythe to the remaining structure feels like a Walmart memo rather than a clever decision. Having said that, the appointment of Andy Murray as Chief Customer Officer brings a welcome focus to its strategy albeit with a Walmart bias.
Project Renewal, scarily reminiscent of Tesco’s Project Reset, brings range rationalisation, or more accurately, range slashing with a heavy dose of prejudice. It also brings price cuts starting with £500m already announced. How this differentiates a retailer from its competitors is questionable however. We would like suggest the name Project Rethink instead, where you start from where you are, build on your strengths which in turn mask your weaknesses.
Andy Murray brings a fresh sense of perspective and strong marketing experience previously lacking. If Andy Clarke uses his talents wisely there could be a challenge to the ingrained price-led strategy of 5 years ago. Ploughing on, focussing on price against the discounters was a battle that it was never going to win. However investing in a more diverse offer, rebuilding confidence in George clothing, and attracting a customer who is interested in more than just price would have been a more compelling and ultimately more successful strategy.
Asda has a weak sales productivity position relative to its competitors and its ability to absorb inefficiency is lower. We want to see something that makes Asda stand apart from the increasingly convergent strategies of the grocers. Asda is not encumbered by over-investment in property so its profit line is not at risk from property revaluation, so has space to manoeuvre.
As we reported at Christmas when we visited the grocers, Asda is not a bad shopping experience, with some great offers and a comparable level of service to its competitors in the Big 4 despite a reduction in staffing. The down side is that it just feels soulless. Where is the retail excitement, personality and reason to keep coming back?
We don’t doubt that we haven’t heard the last of price investment which will continue to feature in the next few trading updates, or about a focus on online retail. But is this what will persuade customers to stop driving past to a competitor? Without a compelling reason to switch from the discounters, new or returning customers will be elusive.
We expect Roger Burnley to make a difference but he is inheriting a house built on sand with few seasoned team players and a leadership team who have either overseen the current strategy vacuum or have at least been complicit in its demise. He will probably spend his first few weeks coming out of meetings shaking his head contemplating the extent of the tough job he has in front of him. The good news is there are plenty of opportunities to make a difference. The bad news is where to start.