The emergence of a credible retail offer from the discounters a decade or so ago coincided with the need for better value groceries.
All the large grocers looked initially a little flat of foot and the phoney price war that had been raging for years (and yet still not really hurting margin) was exposed as being just that – a construction, with little bloodshed.
The discounters were not in the mood to talk, however, and came out with really good prices and a quality message that both surprised and delighted customers.
“Asda’s structural pruning is becoming annual and is no longer attacking dead wood”
Asda, which had long been the price champion, realised it needed to change.
All the grocers started to look at cost and stripped the most visible budget first – labour.
In making successive years of head office redundancies and cuts in store – with a further 800 now potentially facing the axe – Asda’s structural pruning is becoming annual and is no longer attacking dead wood.
Asda used to be proud of its colleagues in-store.
They were included, hired for their ability to interact with customers and each other – and from this population, Asda was proud to promote from within.
The current level of section leader redundancies seems to be a smack in the face for those who have mostly been Asda through and through.
This is more of the same cost saving that can only end up one way for stores, with fewer skilled people doing the job and a little less love of the business to go around.
Cutting structural layers can be the right thing to do in an organisation. It can speed up decision making and make the operation slicker and quicker to action.
“It is unlikely that these changes will benefit the customer and is, in the longer term, unlikely to benefit the business as a whole”
In Asda’s case, the cuts seem to have been made for shorter term profit, rather than the strategic needs of the stores.
In the smaller neighbourhood stores, the structure may look more profitable on paper, yet the biggest issue these shops seem to have is about delivering a consistent customer experience with good availability.
I think it is unlikely that these changes will benefit the customer and is, in the longer term, unlikely to benefit the business as a whole.
Asda needs to learn that the only way it can compete is through scale, owning certain categories, killing them through huge volume and great prices on brands that people will recognise.
It needs to deliver a cost model from scratch that factors in ease of replenishment, resupply and a more flexible solution for handling waste.
It is not rocket science. Walmart insist all its markets deliver sales growth ahead of cost growth.
If you have been haemorrhaging sales for three years, this makes life very awkward for those in the driving seat.
The consequences unfortunately seem to be felt further down the chain of command and, inevitably, by Asda’s customers.