Morrisons is the first of the big four to report on Christmas trading this week, and as expected, it makes for grim reading. While there was no profit warning, Christmas like-for-likes fell 2.5%.
It seems that Morrisons is facing an uphill battle on many fronts. Management believe that it is lagging because of its lack of exposure to online and convenience, but the City believes this is only part of its problem.
Morrisons needs to get its skates on with both online food and convenience. With convenience it is a case of ramping up its expansion, but with online food it is only at the beginning of its journey. Yes Morrisons may be able to get some second mover advantage in terms of the technology used for online food but that is only part of the battle. All the major grocers are powering ahead with online food and it takes years to turn a profit from it. Morrisons’ brand is still not widely known in the south of England either, where it wants to launch first, so it would take something amazing for shoppers to switch.
Some analysts also believe Morrisons should ditch any investment into online non-food, apart from Kiddicare. Perhaps this is a distraction that Morrisons does not need right now? Kiddicare will run itself and is a valuable business and there are quick wins the grocer can gain from it, but the rest of non-food is a different question.
Perhaps more worrying though is the assumption that Morrisons has alienated its core customers. Boss Dalton Philips believes Morrisons has not alienated core customers, rather it has lost the floating customers to other grocers via promotions and vouchers. But some are not convinced by this argument.
Morrisons’ USP is its vertical integration and its focus on fresh food. This is something that will really resonate with customers. But it seems that the messaging hasn’t been right. While Morrisons wants to appeal to middle-class customers who might buy fruit and veg from a farmers’ market, it also has to make sure that its message isn’t too posh for those customers who have always shopped there for fresh food but also, more importantly, price.
So while Morrisons has to step up on the bigger picture strategy, it has to urgently address its core needs.