Asda: smart price credentials
Published:20-February-2009
By Datamonitor staff writer
UK grocer Asda has achieved higher sales growth in each quarter of its fiscal year 2008-2009, recording a growth of 7.2% in the most recent period (excluding fuel), and an admirable figure of 6.5% growth over the whole year. The grocer is now keen to ramp up its expansion and truly maximize the opportunities provided by its value proposition in the deepening recession.
Grocer benefits from value stance but expansion remains sluggish.
Asda has experienced healthy growth over the past year, driven by both increased footfall and single transaction success. With disposable income squeezed and confidence plummeting throughout 2008, customer numbers were higher as shoppers flocked to the retailer for its value credentials. Indeed it gained 800,000 new customers, adding to its existing 17 million, with particularly high gains in the more affluent south of England, where Asda has not traditionally been as strong.
In addition to its value credentials, Asda has also benefited from larger transaction sizes, due to massive food price inflation. For this reason, food sales were strongest in core areas such as grocery, meat and chilled food. Sales of the chain's Smartprice products increased by more than 25% as hard-pressed shoppers attempted to offset price rises. It has similarly witnessed a noticeable shift from fresh to frozen food as shoppers strive to reduce wastage.
In contrast, non-food growth was much slower, but Asda still enjoyed some successes. Sales of George clothing were dented by the closure of the brand's twelve standalone stores in March 2008, but enjoyed boosts from childrenswear and essentials, and the launch of George.com in the latter half of the year. General merchandise was also robust, with the strongest performance coming from entertainment and games hardware, while the launch of Asda Direct in October signaled the beginnings of a significant push into multi-channel non-food retail.
Further expansionary moves included the opening of 21 new stores and the extension of its internet-based food home shopping service to cover over 90% of the UK. However, the retailer continues to be frustrated by strict planning restrictions, and claims it has tens of millions of pounds of funding for expansion that it has so far been unable to spend.
With planning restrictions unlikely to be relaxed, the retailer needs to become more flexible with its store formats and multi-channel operations if it is to fully capitalize on the growth opportunities currently being presented. Ultimately, 2009 presents a real opportunity for Asda to maintain this momentum and utilize its scale and value credentials to benefit from a consumer focus on price for both food and non-food shopping.
