Walmart owned Asda has suffered another devastating blow to its sales which were down a record 7.5 per cent in the second-quarter, intensifying the already high pressure on its marketing team.
It is now the eighth consecutive quarter of declining sales leading Walmart's chief executive Doug McMillon to stress that it’s being addressed “with urgency”.
The retailer blamed “the competitive environment” – in other words Aldi and Lidl – as well as food deflation for the fall, but reiterated statements made previously that it will focus on “improving the retail basics” and “strengthening its offering” as well as the ploughing ahead with its £1.5bn price-reduction plan to turn its fortunes around.
“While our turn-around will take time, I’m confident in the new leadership team there and want to assure you we’re addressing this with urgency,” said McMillion.
However, the grace period for this new leadership team is quickly drawing to a close. This is the first trading update under new UK boss Sean Clarke, who joined in July, and the second quarter for chief customer officer Andy Murray who joined the company earlier this year. Given Asda's performance over the past two years, time is a luxury they unfortunately don't have.
Murray’s impact on the business hadn’t been felt beyond a reshuffle of its agency roster in April, but this quarter he launched its first campaign under new creative agency Saatchi and Saatchi. It starred celebrity chef James Martin and took a different direction than its previous marketing efforts, moving away from the bombardment of ‘low price’ messaging and instead tried to inspire shoppers about what they could rustle up with a few basic ingredients during the summer.
“This ad marks the beginning of an exciting campaign that is designed to emotionally engage with our customers,” said Murray at the time.
And while it is still early days, the campaign doesn’t seem to be having the desired effect.
The issue lies in the fact that price, for a long time, has been what Asda sold itself on. The long-running 'Everyday Low Prices' proposition no longer resonates as strongly as it once did, given a basket of similar goods from Aldi and Lidl will come out on average 10 per cent less and although it’s clearly trying to define itself beyond being the cheapest supermarket an even deeper rethink of how it positions itself in the market is needed.
Paul Thomas, senior consultant, Retail Remedy, said: “Asda's USP was that it was the cheapest grocer in the UK. They lost that crown to the discounters which leaves them with... and there is the problem.
“Price investment is inevitable, but Asda needs more. Quality, value for money also go without saying. Asda used to be innovative but that gene has been inactive for some time now. Non-food is an asset and we would make more of that with theatre, excitement and use it to overcome the soul-less experience that is shopping in Asda.
“Use the colleagues, engage them and they can transfer that enthusiasm to the customer.”
US based-parent company Walmart delivered positive sales for the eighth consecutive quarter, up 1.6 per cent.
It too has been on a cost-cutting drive and recently entered into what it described as a strategic partnership with Publicis Groupe that gave it “unfettered access” to all of the holding company’s agencies and resources.