How Morrisons plans to go from being an admired brand to a popular one
After reporting its fourth consecutive quarter of sales growth, Morrisons has taken encouragement and claims it is now an “admired brand”. But just being admired won’t see sales continue to come through the till which is why chief executive David Potts has his eye on scoring popularity points through an expanded general merchandise offering – including clothing and homewear.
The supermarket’s return to its roots of low prices, good value and fresh food is finally helping it fight back against the discounters following the struggles of previous years.
This back to basics approach has seen a like-for-like sales jump of 1.6 per cent in the third quarter, building on the 2% hike from the previous three months.
But as the billion-pound merger of Argos and Sainsbury’s shows, supermarkets are placing big bets on transforming themselves into a one-stop-shop for more than just cheap groceries. Potts is no different in his belief that broadening its offering will be one of the main drivers of loyalty and has said the coming year will be pivotal for extracting growth from untapped places.
General merchandise expansion
Morrisons has generally lagged its main rivals Sainsbury’s Asda and Tesco when it comes to non-food. It launched its first clothing line – Nutmeg – for children in 2013 but has failed to venture into adult ranges.
Speaking on a call with analysts today (3 November), Potts said that Nutmeg will deliver good growth for the company having posted “strong like-for-likes” this year.
“We’re putting it in another 100 stores this year and it will be in all stores by the end of the financial year,” he said. “And in February/March we’ll introduce Nutmeg ladies which looks good.”
Clothing is not online at this stage, so there is yet more room for growth. Meanwhile, sales of general merchandise (GM), such as homeware and toys, has been steady year-on-year, although it is being driven by a significant increase in online orders.
“We’ve got more to go in terms of annualising the benefit of those sales and what customers want,” said Potts.
To get there, the grocer has been investing heavily in its non-food buying team to be “more relevant and contemporary”, leading Potts to stress that 2017/18 will be an important year for the sector. Its also ramping up a partnership with Amazon that will see it install over 1,000 collection lockers.
“A lot of consumers are loyal to [lots of brands] and we can have our share of that. From time to time they say Morrisons can do better as they can’t get everything [in one place],” he said.
“The popularity of our brand is key to our future. It’s an admired brand but I want it to be popular. The other aspects of retailing are important but that one is paramount.”
One challenge to achieving that popularity among shoppers is how much they’ll be paying for goods post-Brexit.
Last week, Morrisons found itself at the centre of the debate after hiking the price of Marmite by 12.5%, weeks after Tesco refused owner-Unilever’s request for a 10% rise.
Morrisons wouldn’t be drawn on the falling pound, saying: “Our intent is to be more competitive in the environment in which we operate. Our assumption is inflation is bad for customers. So we need to do our best work in providing the best value for customers. It’s an important dynamic.”
Retail analyst Phil Dorrell, partner at Retail Remedy, predicted that this will be the last cheap Christmas before prices are affected by inflationary pressure, “so we expect price to play its role in the Morrisons marketing message".
Like-for-like sales in the third quarter rose 1.6 per cent, with Halloween turnover up around 20 per cent. The figures represent the fourth consecutive quarter of sales growth.