Having reportedly experienced seven successive quarters of declining sales, Asda’s halcyon days have arguably been replaced with tougher times as the Walmart-owned retailer strives to adjust to the UK’s changing market. Former Walmart senior vice-president of perishables Bruce Peterson addresses the query ‘Has Asda Lost It’s Way?’ with delegates at the London Produce Show and Conference last month
Watch out for red flags
“What’s wrong with Asda?” is a question that Peterson, of US-based consultancy Peterson Insights, is often asked. His reply, he tells LPS 2016 delegates, is that nothing is wrong with it. In fact, he asserts that it’s a “fantastic organisation” and says: “There’s really nothing unique about Asda that would cause you to think it’s a bad company – but they are definitely under some challenges.”
Peterson adds that many other well-known retailers are experiencing similar hardships – and that he is simply using Asda as an example of what can happen in the prevailing retail and economic environment. He says: “If you understand the red flags that Asda has manifested in itself you can apply the same thought process to your business, regardless of what side of the supply chain it’s on.” Peterson notes that there are four “red flags” to watch out for, namely:
- your core value propositions
- “moving the cheese” (a metaphor he later goes on to explain) and
- the sector’s evolving channels of distribution.
Don’t let arrogance replace confidence
Explaining the meaning of the first red flag, Peterson warns buyers that mistakes often happen when companies become successful – and that this has arguably been the case with Asda. He says: “You have to be careful inside an organisation not to let arrogance replace confidence. And it can happen to anybody.”
Peterson reveals that Walmart founder Sam Walton’s biggest fear inside Walmart – which operates more than 6,000 stores in the US – was its success: “He feared our success the most because the quality of an organisation tends to go down as the company becomes more successful. Poor decisions do not show up immediately when a company is being successful. When you start to believe that you are bulletproof, when you start to believe that you’ve got it all figured out, that’s when you become vulnerable. And what causes you to believe that is success. ”
Focus on core value proposition
Peterson also tells businesses not to lose sight of their company’s core value proposition. He says: “There are five different value propositions that you can manifest: value and price, convenience, health and wellness, indulgence and social consciousness.”
He adds that Asda’s core value proposition was value and price. “The ‘pocket tap’ thing really resonated with consumers. That’s what drove their market share and value proposition.” But he notes that Asda began to lose sight of its core value proposition when Walmart bought it out. This is because becoming part of this firm meant that it had the capital to branch out – and therefore opened up new superstores and George clothing stores. “Revenue went up and the UK consumer got new shopping experiences. But two other things happened – the focus was taken off of what made them successful and [their] fixed expenses went up.”
Watch out for “moving cheese”
Using a metaphor that was the premise of Spencer Johnson’s bestselling book, Who Moved My Cheese: An Amazing Way to Deal with Change in Your Work and in Your Life, Peterson explains that, when put inside a maze, a mouse in search of food will work out the correct route to the cheese. However, if the cheese is removed from the maze the mouse will still use same route to find its meal – “and the mouse would starve.”
Peterson therefore implies that Asda didn’t change tack once the “cheese” had moved. He says: “That’s exactly what’s happened in the UK marketplace. If you have a business model that works under a certain set of market conditions and those market conditions change, you have to be very careful to adapt to those new market conditions… the same structure that allowed them [Asda] to be successful no longer exists.”
He notes, however, that Walmart (including Asda) now has a strategy in place whereby it is taking a “market hit” on its margin so that it can gain some of its price leadership back.
Evolving channels of distribution
Peterson describes traditional (as opposed to online) retailers as the “bricks and mortar community” – one that’s in the process of dealing with the challenges posed by online retail. He says: “As a result of online retailing, retailing is being re-invented.” He predicts, for example, that most retailers, including Asda and even upmarket retailers, are currently investing in price “because price matters.” The former Walmart man adds that we are also likely to see further investment in small-store formats and the merging of internet shopping with in-store pick-up. Peterson also predicts that, as “bricks and mortar” stores shrink in size, so too will their fresh -roduce departments. “As more and more retailers try to differentiate themselves from the competition, you can’t have this huge broad assortment and do everything well,” he warns
Instead, in the absence of big, bulky displays, packaging is therefore going to continue to grow in importance. “Produce will be used more and more to market social issues, so the packaging and the advertisement will allow retailers to talk about these social issues in a way that resonates strongly with the consumer who’s shopping in that particular store,” Peterson predicts, adding that buyers will become more demanding of specific varieties. “Buyers are becoming much more savvy – they are looking for very specific varieties. It used to be ‘you just went out and bought blueberries’. But they are moving away from this notion that ‘I have to have everything all of the time’.
“Consumers are going to move away from that position as well. If they want to have blueberries year-round they can buy them frozen.”
Own-label will continue to proliferate too as store branding is becoming much more important, Peterson forecasts and so, as Asda – which appointed Sean Clarke as it’s new CEO , aims to reassert its place in the market, fresh produce buyers can, as Peterson highlights, learn a lot from its story so far.