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The following report considers the ethical position of ASDA, noting the external environment in which it operates and its marketing plan.The report finds that ASDA’s focus on low prices has somewhat disengaged it with ethics, with the business more focused on selling volume, as opposed to selling sustainable products. However, given changes in the external environment, and the rise in the discount retailers, ASDA has now been faced with higher competition. To combat this, the report suggests that ASDA looks to change its strategy to focus more on a sustainable supply-chain, potentially one which is focused on UK food and products. While this may lead to higher prices from the retailer, it could improve its image when it comes to sustainable food retailing, and so warrant higher prices to consumers, especially if the introduction of local products develops an emotional attachment for customers.
The following assignment will consider ASDA, considering the external environment in which the business operates as well as its ethical consideration, determining whether the current strategy should be maintained or whether a change is needed, with the assignment then making recommendations.
ASDA is a UK-based grocery retailers owned by U.S. listed Wal-Mart Stores Inc. ASDA has been part of the UK’s ‘Big 4’ retailers in the UK grocery sector, also compromising of Tesco, Morrison’s and Sainsbury’s, however it recently moved from 3rd from 2nd place on the list, being overtaken by Sainsbury’s after disappointing sales. The latest report from Kantar Worldpanel (2016) put’s ASDA’s market share at 15.3%, behind that of Sainsbury’s after suffering a 4.7% fall in sales, compared with a 0.7% fall in Sainsbury’s, and a 1.6% rise in sales at Tesco. To many UK consumers, ASDA has developed on the back of price competition, with the retailer being heavily focused on being the UK’s best value supermarket. Due of its focus on price, ASDA in the past could have been seen to ignore ethical consideration, with some of the top places seen with premium retailers such as Marks & Spencer, who use their premium pricing to better consider the quality/ ethics behind their supply chain.
However, it is this strategy which has been a downfall for the retailer, especially when put against competition from the expanding ‘discounter’s’, namely Lidl and Aldi (Ruddick, 2014). These retailers have aggressively expanded into the UK market on the back of offering low prices to consumers, with their focus on ‘prime-match’, similar of marketing conducted by ASDA against the other ‘Big 4’. Given this, Aldi managed to record sales growth of 10% over the same period, beating all competition and increasing its market share to 6.2%. At the same time, Aldi also announced that it looks to take its store tally from 450 to 1,000 by 2022; Lidl also announced plans to open 40-50 new stores in the UK each year, noted by Gale (2016). This move in the market has been supported from a new business model and changing consumer habits. Discounters have benefitted from economies of scale, reducing the scale of choice to offer just one option; in turn allowing them to increase sales of that product and reduce the production costs. At the same time, these discounters have also expanded on a no-frills approach to stores, moving away from the ‘Superstore’ concept which became popular with Tesco and ASDA. This comes at a time when consumers have also looked to move away from superstores, preferring little-and-often shops to better budget. There also seems to a reduction in customer loyalty as consumers look for the best value.
Building on the above, a SWOT analysis is shown below;
· UK wide presence with 525 stores.
· Still the UK’s 3rd largest grocery retailer – potential to increase share.
· Recent marketing seems to have placed it in the ‘discount’ category when it comes to grocery stores – potentially restricting sales of some of its higher-value items.
· Recent improvement in UK economic fundamentals – coupled with rising wages may increase consumer disposable income.
· Fall in £GBP has put some spotlight on UK food/ products to escape price rises.
· Competition remains the biggest threat to ASDA, especially with discounters such as Lidl/ Aldi quickly expanding their store network, as well as expanding their marketing activities, with a focus on value.
Ultimately, the analysis is suggesting that the main weakness in marketing lies within this continued focus solely on the price. This has come under pressure given new entrants into the market, with the discounters of Lidl/ Aldi coming into the market with business models which mean they can potentially undercut ASDA on prices. This is the main threat to the business, with ASDA still seeing a fall in sales, even with the recent buoyancy in UK retail sales. However, there are potential opportunities for ASDA to diversify, expanding its marketing to cover issues within sustainability and UK produce; improving the ethics when it comes to food sourcing, and issues such as food security and locality.
In the past, ASDA’S objectives have been focused on customer value, however given an expanding ‘discount’ sector, the retailer is now under more pricing pressure to maintain customers. With this, there is the expectation that the retailer may need to diversify, essentially look to attract more customers back to its stores. The objective for ASDA is to tempt customer’s back into its store; or tempt new customers back. Given continued expansion of Lidl/ Aldi, it could be expected that the new strategy will need to focus more on attracting new customers, be it from retailers such as Sainsbury’s.
To support its strategy, ASDA will look to segment the market into different consumers, based on demographics, location, income etc. Given marketing campaigns undertaken by the business, it would appear that ASDA has segmented the market; looking to appeal to those families of lower incomes. Its focus on being the cheapest is indicative of its primary target market. Because of this, the business has become somewhat specialised on this business model, a focus on low-cost, which in turn could impede quality. It has positioned itself in the low-cost end of the market, however given new entrants and intensified competition, is now finding it hard to compete and develop with new competition (Peter, 2011). The business model helped ASDA over the years of recession given constrained consumer income, however as economic conditions have improved, consumers have essentially traded-up. This has provided support to other retailers such as Sainsbury’s, and Waitrose which position themselves at the higher end of the market.
With this, ASDA may feel that its business is currently positioned to narrow, targeting a consumer base which is shrinking which competition is increasing. There are two ways in which the retailer can broaden its consumer base, either through changes to marketing which will target a new market, or by differentiating the product to appeal to a broader base of consumers, noted in Armstrong et al (2012).
Given the above, the main tactic for ASDA s to re-position itself in the market, remove this constant focus on price and look to focus more on ethical issues such as sustainability, which in turn may suggest quality. To do this, the retailer has a number of actions:
- ASDA will move to focus on local; putting its focus on supplying more UK produce in-stores, having dedicated aisles in superstores to local producers. The benefit here will not only be from higher sales of these goods, put also of the positive PR which could arise through supporting local farmers, and local communities. This is essentially classed as differentiation; the retailer will be introducing new products to do so.
- ASDA will also look to introduce convenience aisles into superstores. This will be seen as segmentation, looking to attract a new set of customers to its stores who may have previously left as they prefer to do ‘little-and-often’ shops. This can be marketed by ASDA to target these specific customers.
This section will now discuss the budget for such a change in strategy. The main costs to the business will be seen as the marketing. For instance, when it comes to the ‘convenience aisle’, it could be noted that the infrastructure is already there; the stores will simply have to shuffle around stock to create the new aisle. When it comes to introducing the new products, the costs may be more down to developing the local links, with the suppliers themselves bearing the costs associated with producing the goods. Rather than a major financial cost, the introduction of more local products may be more time consuming for ASDA, given that they will need to ensure that the new products are in-keeping with the goals of the business, both in terms of pricing and quality (Ferrell, 2012).
Marketing will be done through all ’traditional’ channels given the mass-market appeal of ASDA and the fierce competition within the UK grocery sector. While this would involve a higher cost than say digital marketing opportunities, it would be hoped that print advertisements and TV commercial will draw more attention, and so inform more customers. However, digital marketing could also be used, especially when it comes to advertisements through social media, and targeted banner ads which can be used online.
Control remains an important consideration, both in terms of ensuring a level of consistency in the marketing message as well as also monitoring the return on investment (hereafter ROI). When it comes to consistency, while marketing could change to reflect changes in the marketplace, the business must look to maintain its ‘core’ message. For instance, while the focus on new marketing campaigns may be on local produce, the core message remains with the slogan ‘Save Money, Live Better’. Too much of change may lead to current customers becoming detached with the business and its values.
Control will also come with ROI. Essentially, all businesses need to ensure that their marketing spend is generating business. New, digital marketing allows businesses to track this, with businesses able to use tools such as Google Analytics to view web traffic etc. (Chaffey, 2012). Traditional marketing may be harder to manage in terms of ROI, given that it is harder to distinguish how a certain poster/ TV commercial may have driven demand. However, if ASDA move forward with a unified campaign, so changing all marketing to reflect a single message, then the business can understand the potential ROI of the campaign.
To conclude, ASDA has in the past focused its marketing plan on price, looking to drive consumption through low prices. This is itself would not be considered ‘ethical consumerism’, given that some of the lower prices products could be viewed as a damage to the environment. However, this strategy has now placed ASDA into a market segment which is seeing more competition, at a time when the size of the market may be slowing, given improving economics in the UK. To combat this, ASDA has an opportunity to diversify its product range into a more ‘premium’ space; be it the expansion of their ‘Extra Special’ range, or through the introduction of more local products and brands (Perreault, 2010). The focus on UK produce could provide ASDA with a ‘Unique Selling Point’; which could allow the business to justify higher pricing, noted in Fifield (2012). This may also improve the organisations ethical position as it suggests that ASDA is considering sustainability in its wider supply-chain; given that more food is local, opposed to international, reducing the ‘distance’ of the supply chain, potentially being seen as more environmentally friendly. However, at the same time, the retailer must be wary that any change to its pricing may impact on its core customers. In the end, this may further impact on market share, however this is seen as a potential risk of an opportunity. The recommendation for ASDA is that is moves forward with a change in marketing, highlighting developments in both local sourcing as well as convenience. However, ASDA must look to control this movement, and potentially monitor the opportunity. This could be done through monitoring sales of, as well as monitoring footfall into stores.
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