ASDA - A Strategic Mess

ASDA have reported a 4.7% drop in like for like sales in the most recent quarter, and have slipped from second to third place in the supermarket pecking order, behind Tesco and Sainsbury.

A once sure footed and far sighted competitor with a crystal clear strategy now finds itself floundering in a strategic mess.

Here’s why.

ASDA identified the danger posed by discounters as long ago as 2013, and immediately announced that it would invest £1billion in reducing prices. At the same time it decided not to run promotions but to stick with an “everyday low price “(EDLP)strategy, which is what the discounters do.

The rest of the supermarket players eventually woke up to the discounter threat and have responded by a combination of selective price reductions, regular heavy promotions such as buy one get one free, and a promise to match ASDA’s prices on branded goods.

So ASDA is stuck in the middle. It was never as cheap as the discounters and is unlikely to ever be, so its EDLP approach cuts little ice with the dedicated discount shopper. And it offers little benefit over the other mainstream players who have managed to reassure their customers that they cannot buy more cheaply elsewhere, and in addition offered a raft of extremely good deals. ASDA does have its "Price Guarantee" of being 10% cheaper than its major competitors, but this only comes in the form of a coupon after waiting three hours, going on line, and entering the bar code on the receipt. Too much of a hassle for most. 

As a result shoppers cannot see the point of going to ASDA, and have drifted away in droves.

Andy Clarke, ASDA Chief Executive Officer, reckons that sales have now stabilised, and the only way is up. He has mentioned the need to improve ASDA’s online shopping service, and to address the quality of its food, however, both would only bring ASDAin line with what competitors are offering. There is mention of further cuts to get closer to discount prices, and of moving into petrol forecourts to capture the convenience shopper.

These are necessary moves but do not sound like a game changer. Without anwers to the fundamental issue of why shop at ASDA as opposed to other supermarkets, the sales decline is likely to continue.