Interesting Times At Asda

Just what is going on at Asda? Two big hitters have left in the last month, one after just 6 months on the exec board while the steady stream of mid-ranking foot soldiers continues, with over allegedly 60 alone moving to Yorkshire rivals, Morrisons in the last year. The latest Kantar figures show their total share including Netto dropping off again - JS now getting closer to reclaiming 2nd spot.

In a period where Asda should be making strides and eating up market share, they're actually going backwards. Rick Bendall, their Marketing Director, said at the beginning of the recession that Asda would "rebuild Britain" and there were cries of "this is our time" all around Asda House.

Unfortunatly, they got it horribly wrong and failed to learn from the template for downtown period trading from Tesco's performance in the early and mid-1990s.

Tesco, through thorough shopper insight, realised that just because people were tightening up their budgets, that didn't mean they were all suddenly wanting to buy Tesco Value brand products in stripped down shops. Quite the contrary in fact, because British shoppers are inherently snobs. I've sat myself on Shopper focus groups for stores where 15% of volume comes from the opening price point brand and the question of "what do you think of the opp brand?" is pretty much answered along the lines of "oh, it's good that you have it, but I never buy it".

Asda took one look at the downturn in 2008 and went straight to the bottom. Shoppers during tight times don't want price ramming down their throats, constantly reminding them of the harsh realities. Shopping for food is a necessity and they want to feel a bit loved when they walk through the doors. JS have played a blinder in this respect with their shops continuing to look and feel indulgent while Jamie Oliver has been helpfully pointing out that you don't need to be on a banker's salary to feed your family there.

With the innovation coming out of Morrisons too, there's signs that they get that shoppers want quality value, not not just value. You only have to visit Kirkstall or the new M Local format to see that. They were the big share winners in the July Kantar figures showing that shoppers are switching on to their more traditional approach.

So will Netto save Asda in the end? They hardly had the best property portfolio in the UK market and certainly would not give Asda access to more ABC1 customers, reinforcing their position as a low demographic retailer in a world where you have to be mass market. In smaller shops, location is key as the percentage of shoppers arriving by foot or public transport is key. With a high percentage of Netto's located on low-footfall retail parks, this is hardly a good start.

The conversions I've visited however, are really great little shops. The switch to 1m wide bays makes space planning more effective while the design of the fit-out is almost luxurious and indulgent, particularly on fresh areas. Range selection is perhaps a little too skewed towards suppliers who were allegedly paying for distribution points, but mostly hits the need of small supermarket formats to deliver the perceived choice of a hypermarket in a tenth of the space. If Asda could make its superstores look and feel as good as their Supermarket format, they might start improving their fortunes. Some of the design elements can be seen in larger stores, such as repainting the perimeters a deep maroon colour, but the "Everyday Low Cost" mentality value engineers the effect out somehow and the effect is lost.

 If Asda are serious about this format though, there needs to be a pipeline of new sites coming through to strengthen its need for specific supply chain and operational solutions. An Asda Supermarket opening on a declining High Street could be just the injection that area needs and would certainly be more welcomed than if Tesco was after the same site currently.

Their other big format for growth, Asda Living, continues to expand at a snails pace. Only last year, WalMart analysts were shown the future and Andy Bond confidently boasted of 150 stores by 2013. One year later and only one more store has opened and a couple of potential buys, Focus DIY and T J Hughes, have passed untaken. For a long time, Matalan was rumoured as purchase to hit scale but with Darren Blackhurst now at the helm, I'd suggest that he'd strongly resist overtures from a business he left under a dark cloud. The format went through a major transition last year with completely new fixtures and layouts put into two stores (Stratford and Teesside), but the lack of positive PR releases from Leeds would suggest they are yet another failure. Since Walsall opened in 2004, the 26 stores now have had 4 different solutions to trading. Given that Living was Andy Bond's big idea, how much resource will be dedicated under Clarke is debatable. The stores also need scale to become profitable and with WalMart tightening up the belt, this is looking less likely.

Asda could and should be doing better. There are some of the best retailers I've ever worked with currently sat in Asda House. What they need is some leadership as strong as Archie Norman's to unleash their potential. I personally doubt that Andy Clarke has the ability to do that - the question is how long WalMart will give him to get his feet under the table. He will never have faced a more important Q4 than this year and anything less than maintaining second place will probably see him moved to another part of the empire.