It is now two years since Wal-Mart’s acquisition of Asda and the subsequent commitment to EDLP as a business strategy. Those two years have seen the store surrounded by a huge amount of publicity. Initially this focussed on the likely impact of the EDLP policy on the grocery marketplace in the UK. Subsequently it switched to the continuing attempts of Asda to portray itself as the consumers’ champion by removing VAT from feminine hygiene products and challenging RPM on healthcare products. Most recently claims have been made that Wal-Mart’s business style has not been well received by Asda employees, resulting in a number of high profile departures from the business.

Against this background of publicity, Asda has continued to notch up impressive growth in sales and market share. Chart 1 shows the steady increase in quarterly market share; this especially driven by peaks in share at Christmas. Whilst its like-for-like sales would appear to be currently being beaten by Tesco, Asda has consistently out-performed the market since the Wal-Mart take-over. Pricing is clearly at the heart of Asda’s strategy and the latest TNS Superpanel Retailer Price Basket shows that an Asda basket is consistently 11 per cent cheaper than the average basket across all retailers. Despite views to the contrary, Asda is continuing to promote products in-store and BOGOFs are available, just not to the same extent as at Sainsbury’s or Iceland. Asda has also pioneered the permanent multibuy. The most successful and well-known example of this is the Muller yoghurt 3 for 99p, a deal which had seen volumes increase significantly. Yet Asda’s pricing and promotional approach is only one part of the story.

Non-Foods, or General Merchandise in Asda parlance, allows Asda a real point of differentiation. It leads the other supermarkets in clothing, having launched the George brand 10 years ago. Tesco, with its new Florence and Fred range and Sainsbury’s with its Jeff (Banks) range are clearly playing catch-up in this category. Asda have applied the Rollback pricing technique to clothing with results as impressive as those seen in grocery. Other areas of strength for Asda in Non-Foods include Home Entertainment and Health & Beauty. The Health & Beauty experience has shown that Rollback can generate significantly increased volumes, not just for Asda, but at the overall category level. At its new Asda Wal-Mart supercentres, the range of merchandise is vast ranging from bicycles to gardening accessories. In these 100,000 sq.ft. stores, Asda is moving closer to replicating the Wal-Mart stores of the US.

Larger store sizes allow Asda several advantages. They provide the space for additional in-store service counters such as the category leading Curry Pot serve-over or the Pizza bars. Equally appreciated by shoppers are the offerings provided in areas such as Dry Cleaning and Optical Services and through concessions such as Hairdressing. These afford the one-stop shop, which is currently being promoted in Asda’s latest advertising campaign, which borrows heavily from Wal-Mart in the US. As Asda continues to extend existing stores and adds wider ranges, it is only to be expected that the popularity of the store amongst consumers will increase. Currently more than 30 per cent of all households shop in Asda in a four-week period. This means that Asda is now attracting one million more households than was the case two years ago.

So who are these new shoppers? Chart 2 shows the lifestage profile of the store. Asda has an especially strong share amongst the Young Family group. Indeed, in this key demographic, Asda takes a higher share than Sainsbury’s. If this group continues to shop at Asda as they move through life then further share growth can only be expected. However, it is key to notice that all of Asda’s growth has been at this younger end of the market. The store currently underperforms amongst older households where the children have left home. Some of this underperfomance will be driven by the traditional preference of this group to make frequent shopping trips to High Street outlets and to eschew the out-of-town experience. However, it should be noted that this group also exercises large spending power through the influence of the newly wealthy ‘Greys’. Asda is currently failing to attract this group and it might be considered that the reassurance and credibility of the EDLP platform should naturally appeal to them.

Chart 1: Market Share of Till Roll Grocers

Chart 2: Asda Lifestage Signatures

For further information, contact Taylor Nelson Sofres on Tel: 020 8967 4787

Date article published: 15/06/2001

Email: mailbox@namnews.com

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