Asda Stores Ltd-Retailing-United Kingdom-UK-Strategic Analysis Report
Strategic Direction
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Asda is looking to expand its
hold on the UK retail scene with plans for a number of new stores across the UK
in 2009. Meanwhile, in established stores, price promotions continue to be key
in attracting consumers, as it and rival supermarkets battle for title of the
“cheapest retailer”. The company’s wine selection proved particularly
successful in 2008, and with greater numbers of consumers dining and
entertaining at home due to financial concerns, it will be a magnet for
consumers.
Company Background
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Asda is a grocery retailer that
was built up from a Yorkshire-based dairy collective. In 1999, US retail giant
Wal-Mart acquired the business for just under US$11 billion. Asda accounts for
almost 45% of Wal-Mart’s international sales.
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Asda offers a wide variety of
goods and services alongside its core grocery business. Products include
telecoms, insurance, finance, travel agency services, a home-buying and selling
service in the North East, as well as a foodservice offer in-store, petrol
sales, in-store pharmacies and private label pharmaceuticals, and the non-food
George and Asda Living standalone stores. The company even entered the estate
agency environment through the trail of its Homes@Supermarkets service, which
allows customers to browse houses via touch-screen terminals in stores.
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Asda is primarily present in
the supermarkets and hypermarkets channels. It is the UK’s leading hypermarket
operator, in line with the company’s historical “pile it high, sell it cheap”
strategy. The company attempted to enter the c-store channel with Asda
Essentials, but has cut back its trial outlets from two stores to one, putting
on hold any further development of this format. These stores were originally
stocked almost entirely with Asda-branded products, but consumer demand was so
low that Asda was forced to stock more branded goods.
·
Asda beefed up its online grocery
service to serve most of the UK at the end of 2008. This marked a significant
change of Internet policy for the company, which previously downplayed the
importance of “e-tailing”. With the stunning success Tesco has enjoyed online,
Asda is keen to follow suit and make up some of the ground lost to Tesco and
other retailers. The company is keen to break the lock Tesco has in many retail
areas. In the last quarter of 2008 the company targeted Tesco directly in
Inverness by launching a successful delivery service from Elgin, 40 miles away,
ahead of planning approval for its Inverness store.
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Asda’s George label is a
leading discounted clothes label. In early 2009 it launched its mid-size jeans
range, offering female consumers the option of buying sizes 11, 13 and 15.
Private Label
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Asda’s private label portfolio
is divided into three segments: budget, standard and premium. All three are
growing with the aim of competing squarely with other supermarkets’ similar
offerings. Its George clothing brand is particularly well-known. When chief
executive Andy Bond admitted that the George range had lost its way and needed
a makeover, the company hired Colleen McLoughlin and Kimberly Stewart as brand
ambassadors. Former Marks & Spencer retail director Anthony Thompson was
also appointed to reinvigorate the brand.
·
In relation to other leading
supermarkets, Asda has a relatively narrow private label product portfolio.
Despite being tiered price-wise, consumers tend to perceive the Asda brand as
mass market because Asda’s positioning has always focussed on an “everyday low
pricing” policy.
Competitive Positioning
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Asda retained its third place
in retailing despite growth to a value share of almost 6% in 2008. It has
failed to regain its top position in the hypermarkets category, where Tesco
Extra extended its value share lead, in part due to the latter opening more
stores.
·
Asda offers consumers an
extensive range of products and services: groceries, clothes, home furnishings
and electrical goods, books, flowers, an extensive array of insurance options,
savings schemes and loans. Across its offerings the company consistently offers
products at the mid- to lower price segments. In a bid to disassociate itself
from being a downmarket retailer, yet still focussing on price-cuts as the
retailer’s main point of difference, it promotes under its “why pay more?”
banner.
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The company is confident of the
road ahead and plans to expand over the coming period. The discounters
environment in particular is forecast to see good growth, with a constant value
CAGR of approaching 11% predicted for the forecast period. Asda is sufficiently
well-placed to extend its position in this sphere. Growth in the number of
hypermarket outlets will continue as the company looks to retain its position
in this format against the likes of Tesco Extra.
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One of the most dynamic areas
of the retail market is Internet retailing, which is set to see a constant
value CAGR of 14% over the forecast period. Although lagging behind Tesco, Asda
is enough of a household name that with a good marketing campaign, accompanied
by low delivery fees, it could narrow the gap on its rival.
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