Asda’s continuing sales slide highlights the extent of the challenge that Sean Clarke faces. We believe Asda requires a radical strategic review.
There are many issues for Mr Clarke to consider, from what to do with excess space to improving quality perceptions, but top of the agenda has to be re-establishing a clear pricing and value strategy. Over the past few years discounters have caused Asda’s price halo to slip. Granted, efforts have been made to cut prices – but then they have across the whole industry – and it will be very difficult for the retailer to compete head-to-head on price against the discounters’ price model which is characterised by fundamentally lower operating costs. If the retailer can’t compete with discounters on price then it will need to pull on the quality lever of the value equation giving shoppers clear reasons to pay that little bit more. But when you have 40,000 SKUs and vast stores to fill, tangible quality improvements cannot be delivered on the cheap.
At the root of its problems, Asda’s strategy to focus single mindedly on ELDP is less relevant than it was a few years ago. And with discounters bound to gain further share as they open new space and Tesco showing real signs of recovery, it could well be that Asda’s nadir is yet to come