Retail’s new King? What challenges face Simon King at Asda?

Around 6 years ago, Justin King reviewed the Sainsbury’s business which led to the ‘making Sainsbury’s Great Again’ turnaround plan which bore fruit resulting in consecutive quarters of growth since it’s inception in 2004, a major reason for Justin’s arrival was Asda taking over as number 2 in the supermarket league in 2003. 

Fast forward 6 years and you’ve got nearly the opposite scenario, despite Asda clinging on to 2nd place (continuing to do so with the purchase of Netto) sales have fallen, till roll data from Kantar shows a continual decline in market share and a business that has lost it’s way a bit.

Step forward King, not Justin but Simon. Andy Clarke’s replacement when he became CEO is Simon Theodore King, 51 years of age, best known for running Kipa in Turkey for Tesco and more recently working for the Panda group as CEO based in Saudi Arabia. He did also have a stint at Safeway in the UK so offers a good all round view of retail in the UK and beyond. Interesting that he has such vast European experience, perhaps he is one for the future direction of Wal-Mart?

As COO he takes responsibility for the nuts and bolts of the business – distribution, retail, supply chain, customer services and internal comms. A business that’s struggling for market share and sales should look first and foremost at the availability of product, despite opening fill being good, the subsequent availability varies widely and it’s not uncommon to go into Asda on a late night Friday / Saturday and see more gaps than products. If you are losing sales then surely it’s because customers can’t get what they want?

With the industry being as competitive as it is, a customer who can’t get any items of their shopping will go elsewhere to get it, they may go to Morrisons, Tesco or Sainsbury’s who may well have the items in stock, the customer may be seduced by the offers, store environment, pricing and then decide to do the full shop there next week to do it in one trip rather than two.

Multiply the above example by 10,000 across the country and you’ve got major problems whilst playing directly into the hands of the competition. Our blog continues to highlight this.

Asda have made modifications to the Wal*Mart systems, adding Galleria on for the fresh food forecasting and moving from a 6 day to 7 day ordering pattern as well as implementing OSCA for in house tracking of availability. King’s experience of working for Tesco with their SBO ordering system and Safeway’s much lauded SM3 system will bring some new perspective and process to improve availability in the short term.

There was criticism that Bond and Darren Blackhurst were too focused on non-food at the expense of the core food offer, it’s clearly something Andy Clarke agreed with, stating that the own label food wasn’t good enough and investing £100m in a ‘chosen by you’ food range.

Blackhurst’s ‘less is more’ ranging review was also reversed in the main after customer complaints so all eyes will be on Charles Redfield when he arrives at Asda house as Chief Merchandising officer as to what his outlook will be, the offer will remain EDLP and certainly likely to have less promotional reliance.

It appears as though the top team has a good mix about it – Wal*Mart perspective from Redfield, Asda continuity from Clarke and Judith McKenna and new input from Simon King – the management team has a nice rounded look about it.

Operationally – Asda is far from stellar, availability does vary although recently improved it does have some way to go to match the levels that Morrisons and recently Sainsbury’s achieve. It was scored second worst in a recent survey for promotional availability (behind Tesco) stating that 25% of shoppers who arrived for a promotional item were unable to purchase it.

The delivery of the store is variable, opening fill is packet perfect but as the day progresses, the availability worsens, advertising isn’t consistent in delivery and it’s common to see replacement offers on gondola ends without updated advertising, these issues aren’t limited to Asda but it’s room for improvement. There has been a definite improvement in levels of stock holding with a drastic reduction compared with recent years but is this to the detriment of availability?

King will look to use experience at Tesco and Safeway who are / were stellar store operators, indeed Safeway failing more due to the larger dynamics of their customer offer and weak strategic decision making at the top, their system and process were very much at the forefront of the industry so his experience and insight there will be invaluable.

He inherits a business that has a forward thinking CEO in Andy Clarke who has at least tried to arrest the slide and remedy the issues with the own label, he’s Wal*Mart’s choice too so will get time to resolve the issues and get Asda growing in line with the market once more.

The issues mentioned above are hardly upon the scale that faced Justin King in 2004 at Sainsbury, the depots aren’t failing and stores aren’t selling fresh air in the absence of stock but the availability Achilles heel is an issue that definitely needs remedying to ensure that the business can move forward, especially as it welcomes the 148 or so Netto stores into the estate in 2011.

Small stores have grown in popularity with Sainsbury’s and Tesco and they now operate the ‘Local’ and ‘Express’ format very successfully, Morrisons have switched on to Convenience and plan to launch next year.

More on the blog in the coming weeks as Simon King beds in at Asda.