Is Asda in a sales trough?

More problems for Asda today as it reports a 0.4 per cent drop in like for like sales for the second quarter, the second period its sales have dropped.

Add to that Kantar Worldpanel’s figures which show a slump in share of 1.7 to 16.9 per cent in the last 12 weeks and it is clear that the Walmart-owned grocery chain is heading for a trough, if it’s not in one already.

This is despite a renewed focus on its Every Day Low Prices strategy and a blitz of promotions and discounts.

Asda’s problem is that consumers seem to view its low price proposition as low quality. The group is being squeezed at one end by the powerful German discounters Aldi and Lidl and at the other by Tesco and Sainsbury’s, which are competing ferociously against Asda’s cheaper brands.

The upshot is that the consumer can’t really be sure what Asda stands for. It looks like a strategy change is required, rather like the major shift at Tesco which was engineered by the McLaurin regime in the 1980s.

Helped by some striking and clever advertising by Lowe Howard-Spink, Tesco managed to convince the shopper that its quality had risen from League One to the Premiership without losing its keen price edge.

Asda is learning that low prices are not enough in themselves, as they can see by looking at the quality available in Aldi and Lidl. So Andy Bond and his associates may have to return to the drawing board and fathom out a new strategy if they are to avoid a continual downward spiral.

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About David O'Reilly

David is a former deputy editor of Campaign and writer for a number of leading titles including Management Today and the Sunday Times. He is a partner in The Editorial Partnership.