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What Asda’s poor financial results tell us about Consumer Behaviour

Aug 26, 2015 Red Flag Alert Updated On: October 10, 2023
What Asda’s poor financial results tell us about Consumer Behaviour

Asda, one of the ‘Big Four’ supermarkets in the UK has seen a slump in its sales, released its worst quarterly sales performance results in the last 16 years last week. This result has come as the worst they’ve seen since they became part of the American group Wal-Mart and puts them at the bottom of the ‘Big Four’ with Sainsbury’s, Morrisons and Tesco all performing better than them.

Is this result evidence of Asda’s own failings or in fact a demonstration of consumer behaviour in general? Asda’s latest results show a 4.7% decline in like-for-like sales in the 11 weeks to June 30th and this is further fall from the 3.9% decrease seen in the first quarter. The results have been described as ‘a nadir’ by Chief Executive Andy Clarke but it has led to the company continuing with the price cutting methods and investment into its large out of town stores.

Shopping On Demand 
The main reasons behind Asda’s failings, according to analysts are that they have no presence against the small local stores which are becoming favoured by many shoppers. Attitudes have moved away from driving out of town for ‘the big shop’ and instead consumers are buying ‘on demand’ and picking up what they need, when they need it from stores such as their local independent providers as well as smaller supermarket alternatives including Tesco Express, Sainsbury’s Local and the lower price Aldi and Lidl, many of which are in central locations, as well as based in out of town spots.

Asda remain committed to their large stores although they have taken steps to move into petrol forecourts, with a process of converting 15 petrol stations bought last year under way. In the next five years they do plan to have 100 forecourt stores which could help their fortunes but doesn’t necessarily solve the consumers demand for on the go and ‘on demand’ shopping.

Asda have stayed away from what one analytic has described as ‘gimmicks and promotions’ which includes things such as large shopping coupons and by staying true to their commitments this has been a disappointing year so far in terms of profits. Despite this analysts do believe that the results were worse than expected as they saw Asda respond to the first quarter effectively, but perhaps the changes they have made will take time to affect their top line.

Fast Fashion Food Shopping
Consumers appear to be applying the same approach to their food shopping as they are to their general retail experiences. There is a growing culture of needing things sooner rather than later. The smaller, centralised shops allow consumers to get what they want, when they want it, rather than adding it to a large end-of-week shopping list and in this respect food shopping is becoming a lot like the ‘fast fashion’ behaviours that have been cultivated in the last decade.

Whilst the other supermarkets are adapting to the market conditions which show that consumers expect an instantaneous experience, Asda are doing their own thing and whilst it doesn’t seem to be working yet, perhaps there will be change in the next quarter.

Published by Red Flag Alert August 26, 2015

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