Asda puts focus on improving brand trust after sales rise

The supermarket’s turnaround is still on track but analysts suggest it will need a better USP than being the ‘third cheapest supermarket’.

asda

Asda is to focus on improving brand trust this year as it looks to build on positive sales growth over the crucial Christmas quarter.

Thanks to a “strong” festive period, like-for-like sales were up 0.5% in the fourth quarter of 2017 – its fourth consecutive increase – while net sales were up 2%. However that 0.5% rise is a slowdown from the 1.1% increase seen in the previous quarter.

Doug McMillon, CEO of Asda’s parent company Walmart – which reported a 2.6% increase in like-for-like sales – says while the UK supermarket still has “more work to do”, the results show that customers are responding to Asda’s efforts to improve the in-store experience and strengthen its private brand and online grocery offerings.

Moving into 2018, Asda’s new president and CEO, Roger Burnley, says there will be an increased focus on Every Day Low Prices with the launch of Rolled Back Staying Back, continued innovation in Asda’s own brands and making it easier for customers to shop. Asda says it will also be looking for new ways to support its communities.

“We’ve already made some really strong commitments to reduce our use of plastics and to support Fareshare and The Trussell Trust in our fight against food poverty – and we will continue to act on the issues that matter to our customers,” Burnley added.

Asda’s investments into improving the customer experience seem to be paying off, with consumer perceptions of the brand on the up. According to YouGov BrandIndex, its index score (which is a measure of a range of metrics including quality, value and satisfaction) increased by a statistically significant 1.8 points, compared with the same period last year.

With a score of 17.7, the supermarket currently ranks 8th in the UK – sandwiched between Tesco (22.2) and The Co-Op (16.3).

Bryan Roberts, an analyst at TCC Global, says while Asda has been making progress on a number of levels – including pricing, availability, service and private label innovation – being third cheapest in the market (behind Aldi and Lidl) is not a rock solid USP, “so they’ll need to build on other strengths like choice, seasonal and George to prolong this recovery”.

He adds: “Store format improvements like Eastlands and Didcot augur well, but I feel that they are still lacking a general silver bullet for the big box conundrum.”

Looking ahead, Bruno Monteyne, an analyst at European Food Retail, says Asda can do two things to improve its offering: develop a private label range that can compete with hard discounters, such as Tesco’s Farm Brands “but times five”, and improve its store standards.

“A lot of that is happening, but it takes time,” Monteyne says. “Also given the importance of cash and profit contributions to Walmart, Asda isn’t in a position to do a major reset of profitability (like Tesco a few years ago). So they need to work their way more gradually.”

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