Asda this week reported bleak quarterly sales figures, after a Christmas season in which it opted out of the Black Friday discounting that it helped to introduce to the UK.
In the run-up to Christmas, the supermarket told its customers that it had listened to them in its decision to opt out of Black Friday discounting. Instead, it said, it would invest in a range of offers throughout the Christmas season.
But figures out this week suggest that decision cost it dear. Like-for-like sales in the 13 weeks to January 1 were down by 5.8% – falling for the sixth quarter in a row. Through 2015, sales fell by 4.7%, on a like-for-like basis. Reports put two percentage points of Asda’s sales decline down to its own price cuts, and a further 0.4 percentage points as a result of its decision to withdraw from Black Friday. The retailer also lost out as shoppers opted to buy with discounters instead.
Asda chief executive and president Andy Clarke said the year had been a difficult one. “The UK retail market is continuing to undergo significant and permanent structural change, competition in our sector has been fierce and our market share has come under pressure,” he said. “In that context, our results for the year have been commendably stable, balancing investment in our customers with disciplined financial management in a period when many of our competitors have suffered severe falls in profitability. We have steered a careful course through this very turbulent period for the industry and through a complex set of challenge.”
The update comes weeks after Asda announced it would put an extra £500m into lowering prices, adding to £1bn already committed to this end in the five years to the end of 2018 in Asda’s Project Renewal. The move, said the supermarket, would make it cheaper than the rest of the big four, while closing the gap between itself and discounters such as Lidl and Aldi.
At the time, Clarke said: “The structure of UK grocery retailing has permanently changed to reflect the way that customers shop today. Being part of Walmart also gives us insight into similar trends in the rest of the World and it’s clear that this is a global phenomenon.
“We saw the change coming and responded in 2013 but we didn’t move fast enough. There is currently no growth in the food market and the rise of the limited assortment discounters means that we must take radical action to win back our customers. Today, from our strong financial position, we are taking another bold step forward in our five year strategy.”
This week, he said: ““Project Renewal is the right strategy to get us back on the front foot, using our market leading value proposition to give our customers low prices and unbeatable value. That has been Asda’s successful proposition over the last fifty years and that’s what will deliver sustainable growth in the long term.”
Commenting on this week’s figures, Viv Craske, head of innovation & digital at retail marketing specialist Live & Breathe, said: “2015 saw the growth of discounters as well as online and convenience formats, Amazon dipping its toes in the market and grocers slimming down ranges in large formats. But at the same time the supermarkets made a number of improvements to their grocery offering – and that hasn’t gone unnoticed by consumers.
“Click & Collect appears to be a key factor in the future of retailing – both in and out of the grocery sector – 18% of shoppers say it changed the way they shopped last year. It’s something that has taken some retailers a while to get right and hasn’t always run smoothly, but is fast becoming an integral element of the supply chain and offering to shoppers. Asda and other supermarkets might do well to focus on these more multichannel services in 2016 and beyond.”
