Bradford-based supermarket chain, Morrisons, has reported a £176m loss for the last 12 months, falling from a profit of £879m the year before. That’s mainly due to a one-off exceptional cost of £903m for property costs.
As a result it’s seeking to restructure it’s marketing, with fewer “more impactful promotions”, an emphasis on multichannel, plus the introduction of a loyalty card.
Rather than targeting the “Big Four” supermarkets, Morrisons is going to look at the middle ground, between the discount stores and the likes of Asda and Tesco.
“Convenience, online and the discount channels are the fastest growing sectors of the market and this trend is expected to continue. This will be reflected in changing format development as retailers look to align with ever evolving customer needs, behaviours and attitudes,” explained chief executive, Dalton Philips.
The poor performance of online baby product brand, Kiddicare has also hit the supermarket’s profits and it’s now planning to sell the company and also its stake in the New York-based food retailer, Fresh Direct.
The purchase of Kiddicare in 2011 was partly to get a foothold in the online retail market and using the company’s technology and management skills as a starting point for its own online food offer.
“The strategic rationale for the acquisition has been superseded by our decision to launch our online food operation through Ocado, rather than using the Kiddicare infrastructure. A £27m write-off of online costs incurred in setting up an independent online operation was recognised in the first half of the year,” added Philips.
The online proposition launched in January this year and Philips stated that it was performing ahead of plan:
“By the end of 2014, the online grocery market is expected to grow to £7.7bn, up 18% on 2013 and is forecast to grow to £14.6bn by 2018(8), when it is projected to account for 7.1% of the total UK grocery market, almost double what it is today(8). It presents an exciting opportunity for Morrisons.
“[…] We differentiate our fresh offer, just as we do in store, addressing our customers’ demand for freshness by offering an expert review quality rating and by allowing them to check the freshness of products on their doorstep, before accepting them.
“This is one of many learning points from our association with Fresh Direct, a leading, New York based, online food business, in which we took a stake in 2011. We have learnt a huge amount from this association and have incorporated many of their concepts into our new food online proposition. With an experienced management team in place and Morrisons.com now successfully launched, we no longer need to retain this investment and will therefore dispose of it at the appropriate time.”
The supermarket will be trialling a click and collect format later in the year.
It will also be introducing a loyalty card, which had been impossible up until now, due to “outdated computer systems.”
“We do already have a loyalty scheme, Morrisons Miles, which rewards the over five million customers who buy fuel from us. In the first quarter of the year we will start to build on that asset, by registering our Morrisons Miles cardholders.
“The bigger opportunity lies in the 12m customers who shop with us in store. Getting to know them – who they are and what they want – will enable an even greater opportunity to focus where we invest. We now have the necessary systems capability and have commenced trialling a distinctive and customer-focused Morrisons card, which we expect to roll out before the end of the 2014/15 financial year. This is an outstanding opportunity to interact with our customers and will enable an even greater step change to the way in which we invest in our commercial proposition.”
Morrisons plans to invest £1bn in cutting prices and improving products over the next 3 years, £300m of this will be spent in 2014. However, Philips stated that they were planning to remove “confusing and duplicative promotions” and instead investing in “fewer, deeper promotions that create excitement and drive footfall.”
This will be done via “focussed and consistent communications”, highlighting low prices and “stunning” deals.
