January 22, 2016

Asda celebrates 50th birthday with staff cuts

Asda store celebration of 50th anniversary (photo: Asda)
50th anniversary: But, as fresh waves of redundancies batter the workforce, will there be any staff left to celebrate the next one? (photo: Asda)
Only a few days ago Andy Clarke, CEO of Asda, the UK's third-largest grocer by sales, spoke somewhat ominously of "turbulent times" ahead and another tough year with "massive pressure" on supermarket operators. Staff are now learning what exactly he meant by this.

According to the UK media, 200 senior management positions were eliminated on Monday with around 600 more still under review. Estimates vary widely, but as many as 1,000 jobs could be at risk at both HQ and store level in a major reassessment that has the potential to affect up to 5,000 staff. This bloodbath follows a cull of 1,360 jobs in the shops last July.

But the power to sack provides only fleeting gratification to those in command. Customers begin to complain about a lack of service, and management talent will drift to competitors. Constant fear of redundancy may make employees pleasingly subservient to dominant execs, but it seldom fosters creativity or entrepreneurial spirit.

With a motivational flourish that will surely have old Sam Walton, founder of US parent company Walmart, 'a rolling in his grave, the UK media also report that Asda now plans to scrap all canteen facilities along with vending machines and free cups of tea and coffee. What, one wonders, is next?

Will they start saving on the heating and turn down the thermostat in the middle of a British winter? This is strange stuff indeed from a subsidiary of the world's largest grocer whose bigwigs in Bentonville/Arkansas never seem able to proclaim emphatically enough how much they love their staff.

Andy Clarke, CEO Asda/Walmart (photo: The Daily Telegraph)
Andy Clarke: "We must take radical action to win back our customers" (photo: The Daily Telegraph)
In fairness to Clarke, he is currently in a fight with German discounters Aldi and Lidl on price and is obviously trying to reduce costs wherever he can. But the most recent round of staff cuts is surely sending the wrong message.

Meanwhile, given the CEO's determination to "take radical action to win back our customers", shouldn't he also be looking at what his 18 million customers encounter every week in Asda's 616 stores (cf. infobox)?

The shopping experience is most certainly not for wimps. If you like your stores big and spacious with a very large range of products under powerful strip lights full stop, then Asda is clearly the one for you. If, however, you demand ambience and aesthetics when you shop, then you may well find that you have taken the wrong door.

Customers shopping at an Asda store (photo: Asda)
Still 18 million customers a week: But can Asda stop them drifting away to Aldi and Lidl? (photo: Asda)
Doubtless there are better outlets within the corporate estate, but a recent visit to an Asda Superstore on the North Farm Industrial Estate in Tunbridge Wells, Kent, revealed a soulless hanger-like construction with little character and truly horrible store background music. The entry to the building constructed in 2012 was unwelcoming, and the overall atmosphere both unrefined and unsophisticated.

The recent staff cuts also seem to have taken their toll. In the 31,390ft² (2,916m²) outlet at Tunbridge Wells it was very difficult to find anything, and despite an official staff headcount of 210 there was nobody about to ask.

Asda checkout lady at the tills (photo: Asda)
Cheap & cheerful: Asda as it would like to see itself (photo: Asda)
So, surely another big challenge for Andy Clarke is how to save costs for the continuing dogfight on price with the discounters without turning Asda's traditional 'cheap & cheerful' message into 'cheap & nasty'.

This is particularly hard to do when you have lost your own plot. Over the years, Asda has frequently tried and invariably failed to attract people with above-average income onto its premises, whereas even Lidl and Aldi have been able to achieve this! Asda has also allowed its initially successful and clever "George" private label clothing range to be mullered by Primark.

But, despite these failures, Asda, along with Morrison's, was seen for decades as the working man's alternative to Tesco and Sainsbury's. So although there has always been a large proportion of middle-class, suburban Britons who wouldn't be seen dead in one of their downmarket stores, they were able to capture a goodly chunk of the 'value sector'. But then came the German discounters who have been increasingly beating Asda at its own game!

Asda in 2014

Year to: 15th February, 2015
Group revenues: £23.2bn (-0.4%)
Total sales excl. petrol & VAT: +0.5%
Like-for-like sales (excl. petrol, VAT): -1%
Operating profit: £1,013m (+1,9%)
Underlying operating profit: +4.1%
Net cash inflow: £370m
UK store base: 616 outlets, including 32 Supercentres, 332 Superstores, 34 Asda Living stores, 201 Supermarkets, and 15 standalone petrol stations
So, even with its current wholesome margin of around 3.5 to 4 per cent, Asda looks like an anachronistic business model that tried to appeal to the mass market, but got caught with its pants down when the Great Recession pushed shoppers into the arms of the German discounters.

If Britain's no. 3 grocer doesn't want to be swallowed by the sands of time like the Sumerian Empire, it must surely reinvent itself fast. So why not start on your stores rather than pruning the workforce, Mr Clarke?

Podcast microphone (photo: Gerhard Seybert-Fotolia)
(photo: Gerhard Seybert-Fotolia)

Podcast. Click arrow to listen to an audio version of the text:

Lebensmittel Zeitung with digital sister (photo: LZ)
Our German B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: By international editor Mike Dawson in
Lebensmittel Zeitung, no. 3, 22.01.2016

German Retail Blog

Sign up for your FREE newsletter now!

Comments for this article are closed.

  1. George Covill
    Created 18 February, 2016 20:59 | Permanent link

    Game Over?

    After today's announcement of Asda's biggest sales fall on record (-5.8% in the quarter including Christmas), I have to say well done for highlighting the problems engulfing this dinosaur. Is it game over?

This is an English-language blog, please write all comments in English!
Thank you.