Morrisons Joins Discount Battle due to Dwindling Sales

Posted on 11 November, 2012 by Kirsten Kennedy

The recession may be over, but this has not led to automatic recovery in the retail sector, with many chain and independent stores still struggling to achieve the levels of sales seen before the economic slump. As a result, many supermarkets have engaged in a price and promotions war, dropping costs and offering customers discount vouchers in order to attract a larger consumer base to their stores and websites.

Morrisons is the latest chain to enter the discounts battle, as the level of competition in sales and promotions by rival supermarkets has proven to be too high to ignore. Despite chief executive Dalton Philips previously claiming that the company would be relying on low prices and customer loyalty to reach sales targets, he has now admitted that discounts will be a key strategy in Morrisons stores during the run up to the festive season.

The popular supermarket brand will be launching its Christmas range on Sunday, which it hopes will boost consumer interest due to a wide range of festive goods at low prices. This includes a Christmas dinner offer, where customers can pick up everything required for the highly anticipated meal at a cost of only £2.49 per person.

Mr Philips explained his reasons for the company’s turnaround on discounts in the lead up to Christmas, saying; “A third of families we have talked to said they would be cutting back on presents this Christmas.

“They are going to still celebrate, but will be very focused on value.”

He also acknowledged that a lack of advertising on the part of the chain may be a significant factor in the general lack of consumer interest when Morrisons do run money off incentives and promotions. This could also be damaging the chain in conveying its strengths as a fresh food retailer, as not enough has been done to promote the Fresh format being implemented in many of its stores nationwide.

The supermarket chain is currently the fourth largest in the UK, yet this is by no means a stable position as budget supermarkets such as Lidl and Aldi are growing increasingly popular, while upmarket brand Waitrose – owned by the John Lewis Group – has managed to boost its customer base with the release of its own brand Waitrose Essentials range.

Morrisons has released a report showing that like for like sales, excluding fuel and VAT, have dropped by 2.1 per cent, indicating that a radical rethink of market strategy is required in order for the chain to remain in the top four of Britain’s largest supermarket brands as the economy begins to recover in earnest.

In a statement, Morrisons said; “With consumer confidence still fragile and high levels of promotional activity a persistent feature of the market, the trading environment has remained challenging through the period and sales were lower than anticipated.”

Yet despite the drop in sales, the company claimed that annual figures were expected to be “broadly” in line with their initial predictions.

Morrisons will be hoping that the Christmas season will see large improvements to their sales figures. The Fresh format introduced to many of its stores will certainly prove popular with seasonal shoppers looking for top quality vegetables for Christmas dinner – but once the festive season is over, will the format still prove to be a worthwhile investment?

Director of Retail Remedy, Phil Dorrell, certainly thinks so – provided that Morrisons can use the Christmas season to make the most of the Fresh range.

He says; “The new Fresh Market displays are a huge improvement, and the stores make the most of their space – with sales per square foot increasing every year.

“But to truly reap the rewards of its investment, Morrisons needs greater footfall; record numbers visited its stores in the last quarter, but the Olympics bounce that’s included in these figures won’t be replicated.

“The chain needs a powerful Christmas marketing campaign to deliver people through the door, and appeal to a younger audience.”

Do you think that a big Christmas marketing campaign will put Morrisons back on track, or should the chain implement a more of a long term strategy in order to gain back some of the money invested in the new store formats?

Would you pay slightly more for fresh produce for the Christmas table, or do you think shopping at budget rivals such as Aldi gets you more for your money at a time of year which can prove to be expensive?

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