So the wolves are sniffing around Morrisons, attracted by the value of the freehold assets and the scope for some financial engineering. The root of the problem, however, lies in the brand itself.
The disastrous acquisition of Safeway is a familiar story. A simple, monolithic business with a brand offer tailored to price-led northerners tried to absorb a much bigger, more complex and technically sophisticated retailer with a diverse portfolio and a promotion-led offer. The task would have stretched the best brains in the industry but most of them worked for the opposition, quickly joined by Safeway’s most talented executives.
Safeway itself had a chequered history. When trading as the UK subsidiary of its US parent, its offer was based on good quality fresh food and customer service and attracted a relatively well-off clientele. Once acquired by Argyll, however, its brand equity was eroded. The priority was pleasing the City, and product quality and innovation suffered.
“How do you attract shoppers with whom you never had affinity?”
In response to declining sales, the board fell back on consultants to conjure up what Jim Collins (author of How the Mighty Fall) calls the ‘silver bullet’. The adopted solution was to reposition the brand on its weakest group of customers, namely families with small children. But this demanded a price-led offer that Safeway could not deliver without a big margin sacrifice, and for a City-facing culture that was never going to happen.
The board’s last throw was to hire “a leader as saviour” in the shape of Carlos Criado-Perez, whose promotion-led strategy engineered a brief revival in sales but did not tackle the underlying ambiguity of the brand. What sort of customers was it really trying to attract? Asda and Morrisons loyalists came to cherrypick the promotions but didn’t convert.
The typical Safeway loyalist was still affluent, Southern and middle-aged who, faced with Morrisons’ north-facing offer, went elsewhere. Now too many Morrisons loyalists are shopping with the discounters so the CEO is taking the offer upmarket, as The G33 shows, and is struggling with the same dilemma Safeway did. How do you attract customers with whom you have never had much affinity? Answers on a postcard, please.
Kevin Hawkins is an independent retail consultant
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