For the best part of two years before Morrisons tied up its deal with Ocado ahead of its online launch CEO Dalton Philips faced endless questions about when it was going online, and how it was going to do it.
At the same time Philips began using the mantra of the headwinds created by not being online and only having a fledgling convenience business as the principle reasons for its stuttering performance. However all throughout this period The Grocer has consistently questioned this view, believing that Morrisons’ real challenge lay in its core estate and the threat caused by the discounters.
Yesterday Philips finally acknowledged that this was the case. The slightly odd thing about it was Philips describing Aldi and Lidl as “new entrants”. In Morrisons’ results presentation it claimed “the year also marked the emergence of the grocery discount sector as a significant and growing force in the market.”
Such remarks do make you wonder where has Morrisons been for the last few years. Unfortunately the answer to that question is that it has been on a journey upmarket when this was the last place its customers were thinking about going.
The irony of yesterday’s announcement will not be lost on many observers or, indeed, on Sir Ken Morrison. The retailer is not going to take the discounters on head on but rather look to position itself somewhere in the space between them and the likes of Tesco and Sainsbury’s – funnily enough this sounds exactly like where it was four years ago when Philips first arrived.
Putting all that aside, Morrisons’ decision to sacrifice is profits from £783m to around £350m as it focuses on price is certainly a bold move and one that clearly needed to be done – the only fear is that getting the customers it has lost back may not prove as simple as lowering a few prices. Let’s hope for Morrisons’ sake that this is not a case of shutting the stable door after the horse has bolted.
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