Morrisons chairman: 'accountants winning' in supermarket war at expense of honesty with customers
New Morrisons chairman, Andrew Higginson, believes the accountants are winning in the supermarket price war, at the expense of innovation and honesty with customers.
Speaking at the Advertising Association’s Lead conference in London today (29 January), Higginson said the ongoing battle over driving shareholder value versus winning customers keeps non-executive directors awake at night.
"In the case of the executives in retail, they are always looking for permission to keep opening stores even when there is no growth in consumer spending. Driving shareholder value has become this mythical thing that has been chased and chosen over what they should be doing – which is chasing customers.”
Hovever, he conceded that all public companies have to deliver for shareholders, “but too often the accountants win”
To exemplify the point, Higginson recounted a time when he went into his local Express store and bought a bottle of wine for £6 that had been reduced from £12.
“It was a perfectly nice bottle but there was no way it was £12. They are kidding me. It was accountants chasing numbers trying to prove the unprovable,” he said. “You see that kind of dishonesty all the time. If you believe the ‘big four’ they’re all the cheapest - I’m an accountant and reality is none of them are that cheap!”
A fomer Tesco executive himself, Higginson also weighed in on the troubles at the supermarket and echoed Sir Terry Leahy's comments that it was a case of leadership failure.
Higginson suggested the now embroiled supermarket saw success – taking over from Sainsbury’s as market leader when he joined in the mid 90s – not as a result of price or scale but because it innovated for customers thanks to initiatives like 24-hour opening times, home delivery and ClubCard.
“Then the recession in the supermarket game saw many businesses stick to what they were good at, but some turned to this mantra of improving returns. If you want to distinguish those, the discounters [for example Aldi and Lidl] stuck to their knitting and supermarkets tried to improve their returns.
"It was a failure of management really in the choices that were made; a lack of honesty in the choices that were made, a lack of honesty with themselves – shareholders pretending they could carry on delivering returns throughout the recession – but most of all with customers,” he said.
He argued that to win in this competitive sector, supermarkets need to be "frank and honest with themselves” and stop prodding eachother with claims of better prices.
"We need to actually listen and engage with customer feedback over endless weak promotions," he said.
Morrisons recently suffered a 5.2 per cent fall in Christmas sales, but remained adamant that its pricing strategy and marketing focus on fresh food will steer it through the turbulent conditions.