Morrisons is gaining trading momentum under the stewardship of boss David Potts, but the former Tesco exec claims there is “a lot more to do.”
On the day the grocer posted its first full year of profit and like-for-like sales growth since 2012, Potts insisted that the business remains in the “fix” chapter of his three-phase turnaround plan.
However, Potts believes those periods are “concurrent” and is now actively planning for the “rebuild” and “grow” stages.
Retail Week analyses the key ways Potts is bidding to take Morrisons’ profitability to the next level.
Improve in-store service levels
Morrisons insists that its turnaround to-date has been “colleague-led”, driven by improvements in customer levels in stores.
But Potts believes there is more room for progression.
During the second half of its financial year, the grocer introduced an automated cloud-based ordering system across its estate, which was used within its fresh categories.
As a result, availability improved, with gaps on shelves reduced by up to 30%, while cost and stock levels also dropped.
Morrisons now plans to roll out the technology across all categories except clothing during 2017.
The grocer says it will also improve the scheduling of labour to ensure that more staff are on the shopfloor at its busiest times.
Morrisons has already implemented an initiative whereby it opens a new checkout if any customer has to queue up behind someone else.
As a result, Morrisons is serving more customers, with the number of transactions growing 4% in 2016/17 compared to the previous year.
Enhance its local credentials
The Brexit vote may have exacerbated the need to source more food domestically and Morrisons is leading the charge on that front.
Having commissioned the British Food Report, Morrisons hits the road next week in a drive to recruit 200 new food suppliers from across the UK by the end of this year alone.
The grocer has set up a dedicated ‘local solutions team’, which Potts says is “making good progress”, with a number of stores now sourcing locally grown fruit and vegetables.
Morrisons is in the process of introducing ranges including Lincolnshire pork and beef to stores in the region and will also ramp up its local offer around regional events including Hogmanay.
Potts may have shuttered Morrisons’ 140-store M Local convenience business shortly after taking the helm two years ago, but he is clearly eager to tap into one of grocery’s fastest-growing sectors.
Its supermarkets are already being reformatted to give more prominence to its food-to-go proposition, while investment has been ploughed into improving its range of sandwiches, salads, pasta pots and sushi boxes.
But Potts also wants to regrow the retailer’s smaller store footprint in a “capital light” way through its Morrisons Daily petrol forecourt format.
It piloted a clutch of the shops with both Motor Fuel Group and Rontec – and today it unveiled plans to extend the relationship with the latter by opening 40 more stores by the time of its next interim results.
Potts refuses to be drawn on how big that estate could become, but admits: “We intend to be a bigger wholesaler than we currently are. If you do a good job, it will be growing.”
Develop its ‘popular and useful services’
Morrisons already offers a string of third-party services to its customers, but Potts is actively looking to expand that proposition to give customers “more reasons” to visit its supermarkets.
The grocer has Timpsons shop-in-shops in 150 of its stores and Amazon lockers in more than 400 high-footfall supermarkets.
Potts says customers are also “responding well” to improved menus and service levels in its in-store cafes, which drove cafe like-for-likes up 3.7% last year.
But Potts eyes further room for growth.
Following a small-scale trial with Doddle – which was revealed by Retail Week – Morrisons is now planning a wider roll out of the click and collect concessions.
And it also wants to use excess space in its car parks to bring in “small retail spaces” and services such as hand carwashes and tyre-change concessions.
Morrisons says it has already identified “opportunities to locate complementary retail services” at more than 30 stores, with the first of those “planned shortly.”