ASDA Smart Price

Asda

Asda is a United Kingdom supermarket chain which retails food, clothing and general merchandise. It became a subsidiary of the American retail giant Wal-Mart, the world’s largest retailer, in 1999, and is the second largest chain in the UK after Tesco, having overtaken Sainsbury's in 2003. Asda is currently expanding into the Republic of Ireland.

Asda is Wal-Mart's largest non-U.S. subsidiary, accounting for almost half of the company's international sales.

Asda's marketing promotions have usually been based solely on price, with Asda promoting itself under the slogan Britain's Lowest Priced Supermarket, 11 Years Running. As a wholly owned division of Wal-Mart, Asda is not required to declare quarterly or half-yearly earnings. It submits full accounts to Companies House each October.

History

Asda Stores Limited was founded as Associated Dairies & Farm Stores Limited in 1949 in Leeds. The adoption of the Asda name occurred in 1965 with the merger of the Asquith chain of three supermarkets and Associated Dairies; Asda is an abbreviation of Asquith and Dairies, often capitalized. For a short time in the 1980s Asda Stores Ltd was a subsidiary of Asda-MFI plc following a merger between the two companies. Other companies in the group were Associated Dairies Limited, the furniture retailer MFI and Allied Carpets. After the sale of MFI and Allied Carpets the company name changed to Asda Group plc. The dairy division was sold in a management buyout and renamed Associated Fresh Foods, meaning that Asda has since had no connection with one of the firms its name was derived from.

With stores mainly based in the north of England, the newly focused food retail group expanded further south in 1989 by buying the large format stores of rival Gateway Superstores for £705 million. This move overstretched the company and it found itself in deep trouble trying to sell too many different products. As a result it was forced to raise money from shareholders in both 1991 and 1993. It revived under the leadership of Archie Norman, who later became a front bench Conservative MP. CEO from 1991, Norman was chairman of the company during the period 1996–99, and replicated the store on the basis of United States retail giant Wal-Mart, even sending protégé Allan Leighton to Bentonville, Arkansas to assess and photograph the systems and marketing which Wal-Mart had deployed.

When Norman left the company to pursue his political career, he was replaced by Leighton. Wal-Mart wanted to enter the UK market so CEO Bob Martin lobbied UK Prime Minister Tony Blair on planning issues. Asda, which at the time owned 230 stores and was in competition with Kingfisher plc, was purchased by Wal-Mart on 26 July 1999 for £6.7 billion.

After the takeover Asda continued to maintain its headquarters at the then newly opened "Asda House". This building was one of the first of the new large office blocks to open as part of the redevelopment of the huge area south of the River Aire in the city centre of Leeds, in the Holbeck district, West Yorkshire.

In 2005, amid reported concerns within Wal-Mart about a slippage in market share, partially due to a resurgent Sainsbury's, Asda's chief executive, Tony de Nunzio, was replaced by Andy Bond.

Marketing

Asda is known for two famous marketing campaigns. In the "Asda price" campaign, customers tap their trouser pocket twice, producing a 'chinking' sound as the coins that Asda's low prices have supposedly left in their pockets knock together. Hattie Jacques featured in adverts for Asda in the early 1980s. In the late 1980s, prior to the reintroduction of the tap pocket campaign, advertising for Asda had featured the Fairground Attraction song Perfect. In 2004, Sharon Osbourne was selected to be part of a new marketing campaign by Asda; her last advert was aired in August 2005.

In the smiley face "rollback" campaign, also used in Wal-Mart advertisements, a CGI smiley face bounces from price tag to price tag, knocking them down as customers watch. The focus of these campaigns is to portray Asda as the most affordable supermarket in the country, a claim that is challenged by competitors, especially Aldi. Currently in Asda advertising is a theme featuring singing children and the previous tap of the trouser pocket advertising was reduced to a double-tap on a stylized 'A', still producing the 'chinking' sound. This has included an advert during the 2006 FIFA World Cup featuring the England footballer Michael Owen in an advert with the children singing Vindaloo. The latest advertising campaign has done away with the rollback hook in favour of featuring celebrities including Victoria Wood and Paul Whitehouse working as Asda employees.

Asda has been winner of the The Grocer magazine "Lowest Price Supermarket" Award for the past 11 years, and uses this to promote itself across the UK. In August 2005, rival supermarket chain Tesco challenged Asda's ability to use the claim that it was the cheapest supermarket in the country, by complaining to the Advertising Standards Agency. The A.S.A upheld the complaint and ordered Asda to stop using it, citing that The Grocer magazine survey was based on limited and unrepresentative evidence as it examined the price of just 33 products, and that the survey did not study low-cost supermarkets such as Aldi. As a result Asda no longer cites itself as "Officially Britain's lowest priced supermarket", instead using "Winner: Britain's lowest price supermarket award".

For Christmas 2007, Asda reintroduced the "That's Asda price" slogan as well as the famous 'jingle' to some of its adverts.

Starting in 2008, Asda has been returning to its roots and is now re-focusing on price with its new "Why Pay More?" campaign both on TV and in stores. Current Asda TV commercials in February 2008 focus on price comparisons between Asda and its rivals, using the "Why Pay More" slogan and the Billy Childish version of the classic Dad's Army theme tune. The old Asda jingle has once again been removed.

Asda advertising slogans

"Asda - Why Pay More?" (2008–present)
"There's no place like Asda!" (2007)
"All together better" (2004–2006)
"Permanently low prices forever" (2001–2004)
"More for you for Less" (2000–2001)
"Always happy to help" (1998–2000)
"That's Asda Price!" (1994–1998)
"Always LOW prices... ALWAYS" (1992–1994)
"Aiming to be Britain's best value retailer exceeding customer needs... always" (1990–1992)
"Best for less" (1988–1990)

Corporate social responsibility

Ethical trading Asda has signed up to the Ethical Trading Initiative (ETI) which respects workers rights for freedom of association and a living wage. Implementing this initiative is difficult, however, because the concept of a living wage varies between countries and the buying strategies of a major importer like Asda have an indirect impact on national minimum wages by obliging governments to set them low enough to stop businesses from going elsewhere. Industry pressure groups such as Labour Behind the Label and War on Want have argued that Asda and other budget retailers use unethical labour practices in the developing world to keep UK prices low.Sponsorships

Asda Smart Price

Asda Smart Price is a no-frills private label trade name. The range is in many ways the UK equivalent of the generic brands in US stores. The equivalents from the other of the big three supermarkets are Tesco Value, Sainsbury's Basics and Morrisons Value.

The Smart Price brand can trace its origins to Asda's Farm Stores brand launched in the mid 1990s, which consisted of products that were offered at a lower price than the equivalent famous name brand product and Asda's own brand equivalent. The Farm Stores brand originally consisted of a small number of food only products, largely frozen such as frozen chips and a small range of ready meals, this range later expanded to include fresh food. In 2000 following the acquisition of Asda by Wal-Mart, the Farm Stores products were phased out and replaced with the new Smart Price brand "based on Wal-Mart's Great Value and Sam's Choice".

Smart Price products are almost always the lowest price option (known as Cheapest On Display) in a product category in Asda stores. Occasionally this difference is only a few pence, however in others it is a marked difference. For example, a box of Smart Price Biological Washing Powder costs 50 pence while the equivalent Asda brand washing powder costs £1.50 and well known name brand alternatives cost from £2 upwards.

The Smart Price label was originally a food only brand, however over the years it has expanded to cover almost every product range in the store. Like early generic products in the US some Smart Price products lack what can be thought of as 'frills' in the modern brand name or supermarket own brand, for example the Smart Price toothpaste has an old fashioned screw cap rather than the now more common flip cap and the Smart Price range of crisps come in traditional clear plastic bags rather than the foil bags common to most name brand versions.

The Smart Price brand name even has its own groups (or fan clubs) on MySpace and Facebook.

Asda reduced the price of a pack of Asda Smart Price eight thick pork sausages to 16 p meaning each sausage cost 2 p. This move made the headlines in June 2008 as it was during a credit crunch with higher food prices and a higher cost of living.

George clothing

Asda has its own range of clothing known as George which was created in 1990. This is marketed as quality fashion clothing at affordable prices. Wal-Mart also sells the George brand in Germany, the United States, Canada and South Korea. This George label was named after George Davies, the founder of Next, who was its original chief designer. He is no longer associated with the brand, although it has aimed to remain true to the high quality, low price business model that he established.

In 2005, Asda stated that the George range was a £1.75 billion business, including sales from Wal-Mart stores in the US and Germany. Mintel estimate that George is the fourth largest retailer of clothing in the United Kingdom, after Marks & Spencer, the Arcadia Group and Next.

Asda was the first supermarket to stock wedding dresses. Part of the George line, they cost just £60 while adult bridesmaid dresses ranged between £30 and £35, at launch.

Stores

Asda originally had a "simple and fresh" store format, which under Archie Norman's team and the focus on a Wal-Mart style strategy became even more emphasised. The stores are generally white and green, with simplistic layout but built on a Wal-Mart larger footprint format – Asda's average store is almost 20% bigger than its rivals, but stocks 20% fewer lines.

However, the preferred large-format stores have brought problems to Asda's growth beyond its spurts in both the 1990s and immediate post Wal-Mart era. With the UK's tight planning restrictions, the opportunity to increase retail space via new store builds has been limited. Rather than follow rivals Tesco and Sainsbury's into "local" format smaller-footprint stores, Asda has chosen to adapt its format to niche stores to retain longer term growth.Asda Wal-Mart Supercentres Following the takeover by Wal-Mart, several "Asda Wal-Mart Supercentres" have been opened, creating some of the largest hypermarkets in the United Kingdom. The first Supercentre opened in Livingston, Scotland in June 2000. The Milton Keynes store has opened since then and became the largest Asda Wal-Mart Supercentre. There are currently 21 Supercentres in the UK. Asda superstores There are 243 Asda superstores.Asda supermarkets There are 37 Asda supermarkets (including town centres).Asda Living stores In October 2003 Asda launched a new format called 'Asda Living. This is the company's first "general merchandise" store, containing all its non-food ranges including clothing, home electronics, toys, homewares, health, and beauty products. With these stores they have linked up with Compass Group who operate the coffee shop Caffe Ritazza within some of the stores. The first store with this format opened in Walsall, West Midlands, and at the time of writing has been followed by ten further stores. George clothing stores' In 2004, the George clothing brand was extended to a number of standalone George stores on the high street. George stand-alone stores are all to close due to high rent causing poor returns. Instead, Asda are going to focus on opening 10–12 new Asda Living stores in 2008.Asda Essentials

In April 2006, Asda launched a new format called Asda Essentials in a former Co-op store in Northampton, followed by another in Pontefract a month later. This was modelled on the French Leaderprice chain, with a smaller floorplate than Asda's mainstream stores. Essentials focuses primarily on own-brand products, only stocking branded items that are perceived to be at the "core" of a family's weekly shop. This style of retailing is an attempt to address competition from discount supermarkets such as Aldi, Lidl and Neto. On 6 December 2006 The Guardian newspaper reported that further planned store openings were under review following poor sales in the existing outlets. It was also revealed that the range of branded products has been expanded. In early January 2007 it was announced that the initial trial Essentials store would close within a month after only 10 months of trading.

Distribution

Asda also has 27 depots all across the UK which distribute across the network of stores. There are depots for chilled foods, clothing and ambient products, such as fizzy drinks and cereals.

Other interests

On 10 June 2008 Wal-Mart announced that it has agreed to sell Gazeley Limited Group, the property development subsidiary of Asda, to Economic Zones World (EZW), a Dubai World company.Gazeley is involved in the development of distribution warehousing in the UK, mainland Europe and China and has extended its operations to India and Mexico. Its customers include many of the world's leading companies, third-party logistics providers, original equipment manufacturers, retailers and their suppliers. Gazeley is also a preferred developer of distribution space for Wal-Mart International, including Asda in the UK and Wal-Mart China.Asda Financial Services Asda has established a financial services division, following in the footsteps of Tesco, Sainsbury's and other retailers. Asda simply attaches its own brand to products provided by other companies. Services they offer include insurance (provided by Norwich Union), credit cards (provided by GE Capital Bank) and loans (provided by The Funding Corporation).

Loyalty card

The company does not run a loyalty card scheme, stating that "we prefer to invest the money we'd use to set up such a scheme into driving down prices for our customers".

Internet operations

Asda launched its online retailer service in 1998, but from the start had over-estimated demand. It began with a dedicated depot based in Croydon, South London, but this was closed with a number of redundancies shortly after as sales were lower than expected. It continued the online service, but emulated the Tesco store-based model instead.

Since the roll-out of the grocery delivery operation Asda has moved into non-food online retailing. Current categories include entertainment, contact lenses, furniture, travel, electricals, gifts, mobile phones and flowers, with more categories being launched each year.

In May 2004 it announced a major expansion of the service which would increase coverage from 30% of the UK population to 35%. The Grocer magazine reported a turnaround in the fortunes of Asda's home shopping service under new head of Home Shopping, Richard Ramsden. More recently, Asda stepped up its commitment to home shopping, focusing on full UK coverage by the end of 2007. Andy Bond highlighted that Asda will be recruiting up to 1,800 new staff to bolster its operations and focus on competing with Tesco in the online arena.

In January 2007, Asda launched www.asda-electricals.co.uk to compete with Tesco's highly successful Tesco Direct. This new venture is part of its online business, with more than 3,000 domestic and home electrical products. Asda's long term ambition to capture 5% of the £1.9 billion market by 2012. Recently, the company sold its Durabrand 1005 DVD player for only £9, the UK's lowest priced DVD player, which sold out in just two days from start of the promotion.

International operations

In 2005, Asda expanded into Northern Ireland by purchasing 12 Safeway stores from Morrisons.

Financial performance

In terms of the UK market share, , Tesco had 31.4% of the UK grocery market while Asda's share is 16.8%, followed by Sainsbury's at 16.5%, and Morrisons at 11.0%.

According to CACI, as of 2006, Asda has market dominance in 14 postcode areas; DY (Dudley), B (Birmingham), CH (Chester), L (Liverpool), WN (Wigan), BL (Bolton), BB (Blackburn), LA (Lancaster), HU (Hull), SR (Sunderland), DH (Durham), NE (Newcastle upon Tyne), G (Glasgow) and AB (Aberdeen).

Supermarket Consumer
Spend (£000s)
Market Share
20 April 2008
Change
Tesco 6,336,887 31.1% 0.3%
Asda 3,444,410 16.9% 0.1%
Sainsbury's 3,265,244 16.0% 0.4%
Morrison's 2,317,304 11.4% 0.3%

Employee relations

Asda has 150,000 employees, whom it refers to as "colleagues" (90,000 part-time, 60,000 full-time). The company has featured prominently in lists of "Best companies to work for", appearing in second place in the Times newspaper list for 2005 (although very few, if any, employees at grass-roots level were asked for their opinion). It offers staff a discount of 10% on most items (exceptions include fuel, stamps, lottery, giftcards and tobacco related items).

On "double discount day", in December 2005, Asda temporarily increased the staff discount to 20%, but excluded alcoholic drinks from the extra discount for reasons of "operational profit protection". In 2007 Asda chose to allow staff up to £100 off alcohol before discounts. They were also allowed to purchase items from the George range with 20% off. However, during this "double discount day", all edible and most non-edible grocery products and electrical items (excluding digital cameras) were not included. The GMB Union attempted to get Tesco to offer a similar discount to Asda staff as a publicity stunt, and Asda subsequently included these products in the extra discount, but with a maximum spend of £100, down from £250 in the years before the alterations. While the reinstatement of the discount was intended to be a publicity stunt that improved employee relations, it resulted in further bitter feelings. This was due to the fact that in the years previously, music albums, singles, DVDs, videos and video games had been included in the discount day, but were not reinstated with the rest of the discount after Asda backed down.

Trade union relations

In August 2005, the manager of the Wakefield depot read out what were called "foreign-sounding" names over the public address system ordering them to report immediately to the manager's office. The workers, who were all Muslims, were ordered to produce evidence that they were not illegal immigrants. At least one was threatened with the sack unless he produced his passport the next day. The highly public initiative by management, which came within weeks of the 7 July bombings in London, was followed by a spate of graffiti at the depot in Wakefield expressing hatred and contempt for Muslims and their religion.

In February 2006, Asda was fined £850,000 for offering employees of a newly taken over distribution depot a pay rise to give up union rights. An employment tribunal found the American-owned supermarket chain guilty of promising 340 distribution staff a 10 per cent pay rise to give up the collective agreement negotiated by the GMB union – an act which is illegal under a 1992 labour relations law. The court ordered Asda to pay £2,500 to each employee at the County Durham depot.

In June 2006, GMB Union members at the company's UK distribution depots agreed to strike for five days from 30 June 2006. The two sides failed to agree on how many of Asda's 12,500 depot workers belong to the union across its 24 depots around the UK. The GMB claimed the figure as 7,000, but Asda claimed the number was nearer 4,500. The depots affected include Bedford, Chepstow, Dartford, Didcot, Erith, Falkirk, Grangemouth, Ince George in Wigan, Lutterworth, Lymedale (in Staffordshire), Portbury, Skelmersdale, Teesport, Wakefield, and Washington.

Asda threatened legal action, citing flaws in the ballot process, but after discussion at the TUC, an agreement was reached for a national level consultative body and the strike called off.

Dairy price fixing

In December 2007 Asda, Sainsbury's and other retailers admitted to price fixing dairy products between 2002 and 2003. Asda commented, "Everyone at Asda regrets what happened, particularly as we are passionate about lowering prices, Our intention was to provide more money for dairy farmers, who were under severe financial pressure at the time." So far in total these retailers have been fined £116 million. Tesco, Morrisons and dairy company Lactalis McLelland denied any involvement in price-fixing; however, the Office of Fair Trading (OFT) says it will carry on its investigation. It was announced that the alleged price-fixing cost consumers £260 million.

Awards

  • 1997–present — Voted Britain's lowest price supermarket in a survey by Grocer 33 Magazine
  • 2001, 2002, 2003 — Voted a top 10 UK employer by the Sunday Times Top 100 Best Employers Survey, although the merit of Asda being awarded such an award is contested by the GMB
  • 2002 Nestlé Social Commitment Award, awarded by peers in the food industry

See also

References

External links

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