ASDA - What should the strategy be?

Earlier this month Asda revealed a new strapline, ‘Pocket More’, indicating that price will continue to be its differentiating point vs competition despite posting a drastic fall in like-for-like sales of 5.8 per cent in the fourth quarter of 2015.

Over the next five years, Asda will invest some £1bn into lowering prices as part of a strategy dubbed ‘Project Renewal’ which Chief Executive Andy Clarke believes will give it the advantage over its ‘Big Four’ competitors, as well as stay on the heels of Aldi and Lidl.

On the other hand, Tesco, Morrisons and Sainsbury’s have all made efforts to move away from simply shouting about price at increasingly promiscuous shoppers. 

The brands have looked to create value for consumers in other areas, with improvements to customer service (like Tesco) or inspiring people to think a little differently about the items they regularly buy (see Sainsbury’s 'Little Twist' campaign).

Morrisons also appeared to have ramped up their efforts and have this week announced a new partnership with Amazon so that Amazon Prime and Amazon Pantry customers are able to buy fresh and frozen goods from the online retail giant. 

In the past Morrisons have been slower than their main competitors to build and expand their digital and online footprint. They were the last of the ‘Big Four’ to offer customers online shopping, and it would seem that this is something they are changing in a bid to stay ahead of the discount retailers. 

In contrast to Asda, both Morrisons and Tesco beat analyst expectations in the crucial fourth quarter while Sainsbury's saw sales fall just 0.4 per cent over the same period. These brands are clearly creating a value to the consumer which they don’t believe they can get from Lidl and Aldi. 

And there’s a truth in this. Although Aldi and Lidl do have great customer service they are often staff “light” meaning it’s a proposition they can never live up to. And given their smaller store footprints they are unlikely to always have the ingredient on offer to make your “cooking twist” possible. 

However, they have a big advantage over Asda, they are cheap AND they have quality, and that equals value in our book. 

So do we think the “Pocket More” strategy will pay off? Well in short no, it’s a non-sustainable strategy. Even Aldi and Lidl who are all about price don’t just talk about price. Look at Easy Jet all those years ago, they quickly woke up to the fact that a positioning based on price was no positioning at all. Soon Ryan Air came and undercut them, and they had to change tact. Luckily for them it paid off! 

And there are a lot of parallels with Asda. What Asda needs to do is be a bit brave, step out of its comfort zone and really uncover the value that it, and only it can bring customers. 

And we have a suggestion. Let’s first see what Asda has over the competition in terms of its offer..

On the surface of it, Asda seems to have an advantage over Aldi and Lidl in terms of choice and variety. From a superior food range, to school clothes to stationary, to a toaster, Asda can cater for all your needs where Lidl and Aldi can’t, and when compared with Tesco’s, Morrison’s and Sainsbury’s there seems to still be a perception that Asda is cheaper. 

In this respect we see a clear stance that Asda could potentially flourish with. The value of taking the headache away for families so that they can worry less, and live more. Asda could offer to ‘do more’ for families or even ‘more for less’ so combining the perception of low prices with the idea that you are still able to get more products and choice at Asda when compared with Aldi and Lidl, consequently giving shoppers more time to do the things they enjoy. 

No going to Lidl to find that the thing you bought last week isn’t on sale this week so that you have to pop to Asda on the way home. 

No shopping in three different stores for your children’s clothes, stationary and toys. 

No getting to the till to find that you’ve spent substantially more this week than last week. 

There’s a value in shopping at Asda because they can take the stress away. They are cheap, they are convenient and they mean that my child isn’t screaming in the back of the car on the way home because his favourite crisps were not on sale. 

And Asda can go a step further with some product initiatives, the recent introduction of boxes of misshapen fruit/veg can be altered to include the veg for specific meals for a family meaning less wastage. So whilst Sainsbury’s gives a suggestion to the discerning cook, Asda takes the effort away. 

This can further be substantiated with the click and collect service. You take the effort away by doing all the hard work for the customer, and they can pick up the shopping at the time most convenient for them. 

So it seems to us, that Asda could have something really special. You can be the family’s headache reliever; the brand people just cannot do without and the brand built on family values. Just come out of your comfort zone a little and stop hiding behind this price message.