UNSETTLED supermarket major Morrisons is going for a Back to the Future strategy under new chief executive David Potts. Out go the inconveniently sited convenience stores, Hampstead-style misted vegetables and costly diversification into children’s online clothes with Kiddicare.
In comes a renewed focus on the core supermarket business, and the unsentimental closure of lossmaking stores in that estate. Potts says Morrisons needs to get back to the basics. Arguably, it was mastering those that gave it the pedigree and audacity to take over the Safeway chain in 2004.
In short, really good fresh produce at keen prices, with good instore service to back it up. Potts is not creating hostages to fortune.
There are no extravagant promises of early recovery, more a turnaround over several years (if it works). This is wise.
We will probably be in a deflationary food environment for some time, and the more widespread supermarket price wars prompted by the incursions of German discounters Aldi and Lidl will be major headwinds for all the main players, even the ones better placed currently than Morrisons, for the foreseeable future.
But you have to start somewhere. And Potts seems to have decided that the way ahead for Morrisons is to drive volume growth and staunch food retailing market share haemorrhaging.
Diversification is to be avoided, and, unlike Tesco, there is no international operation to retrench from for Morrisons. Potts will be putting all his eggs in the big stores’ basket, and trying to improve the company’s relatively nascent online operation, currently done quite well according to him with Ocado.
Again, this is wise. The most assured turnaround in the sector in recent decades was Justin King’s one at Sainsbury’s. And his trick was to realise it was not all about back office systems, suppliers and strategic side-turns.
With food retailing, if you get the front-of-house offer right the rest follows. It takes years, not months, as Potts says. But at least there is the advantage of having a relentless management focus on limited, achievable gains.
The likes of Tesco and Sainsbury’s might harbour residual ambitions to compete at the higher end of the sector with Waitrose and Marks & Spencer.
But the best bet for Morrisons and Asda might be to pitch their stalls squarely at being able and willing to take on Aldi and Lidl on price, but with a much-bigger and more nuanced offering.
People like a bargain, but they like quality as well. If Potts can square that circle and get Morrisons comfortably inhabiting the undisputed middle ground again he will have succeeded.
New Living Wage becomes all the rage
THE corporate solecism du jour? Saying you think the New Living Wage is a specious idea. Bosses are queuing to say they have no objections.
Yesterday it was Lord Wolfson at fashionwear retailer Next and David Potts at Morrisons (see above) who professed themselves relaxed about the hit on the bottom line of the extra staff costs. Good for them, and in their cases I believe them.
However, for some companies, the ones who affirm people-are-our-greatest-resource before relocating them down Jobcentre Plus in a right-sizing, it may be a case of losing the war of public opinion on the issue, but trying to garner some brownie points as consolation.