Asda can’t win its race to the bottom with Aldi, so why is it trying? The Walmart owned business needs fresh thinking to succeed

 
Catherine Neilan
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Two years ago this month, former Asda boss Andy Clarke told reporters his business had hit its nadir. There was, he insisted, an upward trend emerging. The troubled supermarket would be back on track in no time.

And yet eleven quarters on, the supermarket is still in decline, with no sign of those promised green shoots on the horizon.

It was not particularly surprising when Clarke was replaced last year, although his namesake and former Walmart China boss Sean Clarke was not well known and his pledge to take on Aldi and Lidl by slashing prices not particularly visionary.

This strategy is not yet paying off - indeed, figures that emerged yesterday revealed last year’s performance was below expectations amid “intense” competition - but there doesn’t appear to be anything else up Clarke’s sleeve.

City A.M. understands the B&M takeover is now off the cards – the suggestion is, in fact, that it was never on them – and for all the talk of investment in quality and customer service, it’s just not translating into growth.

While rivals Tesco, Sainsbury’s and, to a lesser extent, Morrison’s are all starting to show signs of recovery, Asda is still way behind. Most recent Kantar figures showed growth of just one per cent versus 3.9 per cent sector-wide growth. Meanwhile Aldi and Lidl continue their double-digit assault on the sector.

The fact is, most companies operating in this field now recognise that attempting to compete with Aldi and Lidl on price is a fool’s errand. They cut deep but narrow, with smaller stores containing far fewer products than your average traditional supermarket.

Even if you could compete with the Germans on price, getting that message across will take time and – you guessed it – money. So why bother?

While others are focusing on quality, same-day delivery or strategic deals like Morrison’s tie-up with McColl’s, Asda is caught between a rock and a hard place.

Having always operated in the budget space and without a reputation for much else to fall back on, there’s little wiggle room. In the absence of any serious investment or innovative thinking – both of which Walmart is capable of – Asda could suffer death by a thousand price cuts.

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