The 5.8% sales drop over the 13 weeks ending 1 January 2016 represents Asda’s sixth straight quarterly sales decline and follows a fall of 4.5% in the third quarter and 4.7% in the second. The latter Clarke had previously referred to as the struggling supermarket hitting its “nadir”.
Asda’s poor festive performance is in sharp contrast to its big four supermarket rivals, with the likes of Tesco and Morrisons beating analyst expectations to grow sales over the Christmas period.
Speaking at a press conference today (18 February), Clarke was keen to point out Asda’s “stable” balance sheet and blamed the fourth quarter decline on “short-term, see through cut-pricing tactics” at rivals such as Tesco and Morrisons in areas including alcohol and fresh produce.
He told Marketing Week: “Our marketing wasn’t a factor in this fall, it’s more to do with an incredibly competitive market. The ‘Because It Is Christmas’ campaign is one of the strongest festive ads we’ve ever launched – there is no doubt it was a strong piece of communication.”
Last year Asda embarked on various brand changes, including the introduction of the ‘Save Money, Live Better’ slogan, to align itself closer with parent Walmart. And Clarke insisted the changes have “resonated” with customers despite yet another quarterly loss.
“’Save Money, Live Better’ has made a big difference and it means our social work in local communities is now aligned to our mission statement as a brand,” he added. “We will continue to refresh the brand in stores this year and want to refresh another 125 stores. These changes ensure we are a modern retailer.”
A commitment to cutting prices
Asda saw sales fall 4.7% for the year of 2015 as a whole and as part of its 18 month Project Renewal strategy, Clarke said it will commit £250m in additional price cuts and aim to narrow the price gap to the discounters to just 5% in 2016.
But despite its continued commitment to cutting prices, Clarke admitted it could take until 2017 for the supermarket brand to return to quarterly sales growth.
Asda has been one of the biggest drivers of the ‘Every Day Low Prices’ blueprint in the UK grocery market and Clarke claimed today it ‘remained crucial to long term success’. Pointing to Sainsbury’s recent decision to end multibuy promotions, he said it EDLP had become “the buzzword for every retailer” and said that was due to “the Asda legacy.”
However Asda’s price credentials have been severely dented as rivals Tesco, Morrisons and Sainsbury’s all commit to similar price cutting tactics, while Aldi and Lidl continue to rapidly grow market share.
More emotive marketing
Earlier this month, Asda appointed Andy Murray, the founder of shopper marketing agency Saatchi & Saatchi X, as its new chief customer officer with former marketing boss Barry Williams leaving the supermarket after eight years.
“If Andy Clarke uses Andy Murray’s marketing talents wisely, there could be a challenge to the ingrained price-led strategy,” said Planet Retail’s Philip Dorrell of the appointment. “We want to see something that makes Asda stand apart from the increasingly convergent price strategies of the grocers.”
And speaking to Marketing Week today (18 February), Murray, who is yet to officially start in the role, appeared to mirror Dorrell’s views by admitting price-focused marketing – such as the new ‘Pocket More’ campaign Asda launched today – is no longer enough in isolation.
“It is always important to tell your story to the customer and make the brand connect emotionally – those are the fundamentals of good marketing”
Andy Murray, chief customer office at Asda
“I’m not saying we’ll move away from price-based messaging but it has to be linked with much more emotive storytelling.”
Murray – who will be joining Asda from its parent Walmart, where he is currently senior VP of creative – insisted the US retailer still has faith in its UK equivalent.
“I’ve always seen Asda as an innovator and I feel like the UK market is one of the most competitive and advanced retail markets to be doing marketing in,” Murray added.
“But it is still definitely a two way street and from being on the US side many of the different strategies we’ve applied at Walmart recently are directly taken from Asda. I think that shows Walmart’s faith in Asda.”
Walmart reported a 7.9% fall to $4.57bn in net income for the fourth quarter. However it is doing better than Asda when it comes to sales: Walmart’s sales rose 0.6% over the fourth quarter, its sixth quarterly rise in a row.