Morrisons a ‘headless chicken’ in UK grocery sector

MORRISONS continues to run round the UK grocery sector like a “headless chicken” as it continues to suffer from a lack of direction.

That’s according to retail expert Phil Dorrell of Retail Remedy, who says the Bradford-based group’s latest numbers, which saw sales continue to fall in its third quarter, are “proof positive of its ongoing lack of direction”.

“Morrisons has Tesco to thank for the fact that it is not having a harder time of it. Tesco has managed to take on a lot of its bad press,” says Dorrell.

“The store format remains old fashioned and is unlikely to attract a younger customer base. In too many locations, Morrisons stores feel like a boneyard where old retail formats go to die.”

He said the £1bn investment in price promotions only really works if the whole business stands behind it and executes it “holistically” around store.

“Our visits suggest the initiative is poorly executed, disjointed and unlikely to drive any material footfall. And while it’s finally online, Morrisons has last mover disadvantage,” Dorrell says.

“Morrisons needs the sort of marketing shake-up that Argos have undergone. They have to convince people to take another look. Hopefully Andrew Higginson will be able to influence this.”

A broader concern is that a strategy based on price cutting is easily parried by stronger, much more focused competitors, such as Tesco or Aldi and Lidl, according to Dorrell.

“The Christmas period will see people temporarily desert the discounters to an extent as range constriction frustrates their big shop. This is the time for Morrisons to step up and target range and great pricing across the store. It’s an opportunity, but is Morrisons streetwise enough to take it?”

Meanwhile David Gray, a retail analyst at Planet Retail, says yesterday’s results show Morrisons is still struggling to come up with a solution to the “seemingly unstoppable rise” of the hard discounters.

“Morrisons is also undoubtedly being hit hard by the deteriorating state of the UK grocery market, which is characterised by falling food volumes and slowing food price inflation. Market conditions can only get tougher for the beleaguered Bradford-based grocery giant,” he says.

“Even so, its efforts to develop a loyalty scheme in the quarter are commendable and may be just the medicine the company needs – it’s just a shame they didn’t have the customer data that the scheme will deliver before they embarked on e-commerce and c-store expansion. Match & More is the first combined price matching and loyalty scheme comparing prices with Aldi and Lidl. Although early days, this will undoubtedly help stem the tide of shoppers heading through Aldi and Lidl’s doors – although Morrisons may have to accept lower margins and profitability as a result. This is a price it may just have to stomach.”

Gray said that, although brimming with ideas on how to solve the malaise surrounding the chain, current CEO Dalton Philips has yet to deliver a marked improvement in performance.

“If the price-matching loyalty scheme doesn’t deliver the necessary result, Philips’ days may yet be numbered,” he said.