Where has Asda gone wrong?

THE international operations of Walmart have been the badly-behaved child of the group.

Whilst Walmart itself saw a 1% increase in first quarter revenue, its China operations were being slowed down and its UK division, Asda, saw the seventh consecutive quarter of like-for-like sales decline.

According to The Wall Street Journal, Neil Saunders, head of retail consultancy Conlumino, described Walmart as “a company of two halves: the domestic U.S. division, which is performing reasonably; and the international division, which continues to languish.”

The difficult market conditions Asda have been a major factor, and have affected the other Big Four as well, but whilst Tesco, Morrisons and Sainsbury’s have seen at least a plateau in results, Asda continues to struggle.

But where has Asda gone so wrong?

1. Price
Analysts at Planet Retail said that price, and the inability to keep up with the market and competitors has hurt Asda. David Gray said: “Price point is the biggest issue for Asda. They have not moved on price. Whilst the market has been generally moving downward, Asda has not moved on price leaving it trailing behind competitors.”

2. Flexibility
A true bricks and mortar supermarket, Asda may have pipped latecomer Morrisons to the post on online shopping, but other areas have not been so quick to change. The business has just not been as light on its feet as others are trying to be. David Potts’ hard-hitting decisions to cut head office jobs, stop the convenience store experiment with the sale of M Local stores, a tie up with Amazon, and investing in price reductions all in th space of a few months gave Yorkshire-based competitor Morrisons a much-needed lift, like ripping a plaster off.

3. Turnaround plans
Andy Clarke’s Project Renewal and other plans have just not been forceful enough to turn anything around for the beleaguered supermarket. Project Renewal was launched in late 2015 following the worst performance in the supermarket’s 50-year history. Retail Remedy analysts said that there “was no strategy to combat discounters” at the business. “Having only one key marketing message of price over the last 10 years has led to them being very vulnerable,” they said.

Bringing back the pocket-tap in its adverts may have given the British public some nostalgia, but it has not given them incentive to go to Asdas above other supermarkets – standalone petrol stations and more click and collect points just did not cut the mustard. Lidl and Aldi in particular are fast encroaching on the lower price end of the market, which Asda had previously occupied. Even cutting hundreds of staff hasn’t helped turn things around.