Morrisons' smart strategy in difficult times

Morrisons' smart strategy in difficult times

British retail chain Morrisons is planning to open hundreds of “M Local” convenience stores in the next few years, following the success of its first 280 m² trial shop in Ilkley, Yorkshire. The new strategy aims at avoiding the bloody price war in the middle of the (super)market and could well be a smart strategy in these difficult times.

Affordable convenience

Yesterday the local Yorkshire Post reported about Morrisons' ambitious plans to grow through M Local, which would offer “convenience store quality” (a wide offer of fresh food products) at “supermarket-like prices”, which the chain claims to be “4 to 11% cheaper than other convenience stores”. While market leader Tesco and runner up Asda focus on lower prices, Morrisons will invest in up-market stores – hoping to open hundreds of M Local stores in local markets with higher average incomes. 

 

”Many of the major supermarkets have been hitting the price button, with mixed results, while Morissons has been quietly going about its business hitting the fresh and quality buttons to great acclaim”, says Bryan Roberts, Kantar Retail's research director. “Its promotional structure means that it still conveys affordability while avoiding the high/low disruption of others.”

"A Waitrose for the masses"

M Local's different approach to focus on quality and freshness, rather than on prices, is just a matter of intelligent positioning, says Roberts. “Waitrose's continual outperformance of the market shows that quality wins, and Morrisons seems intent on becoming a Waitrose for the masses. The middle ground is the last place you want to be, so heading up market while retaining a value message makes perfect sense.”

 

Aldi and Lidl, who have a slightly different price-value message in Britain, are no threat to Morrisons, says Roberts: “They are doing a few more premium lines but they are still a relatively niche segment appealing to mainly low income shoppers (despite all the hype to the contrary). Stores make a degree of sense due to real estate availability and that Morrisons will have a point of difference through fresh.”

Opting for a flanking manoeuvre

This strategy is only possible because M Local can get their quickly changing offer of fresh food from nearby Morrisons supermarkets. This is a way to reach more (relatively up-market) customers through differentiation near any of the 455 existing Morrisons supermarkets, but makes it impossible to use M Locals to reach new areas.

 

In choosing a growth strategy inspired by convenience, Morrisons opts for a flanking manoeuvre rather than launching a brute-force frontal attack in a price war. This way, 'M' avoids the bitter competition between the top two (Tesco and Asda) and the discounters (Aldi and Lidl), while the British number three Sainsbury’s is anxiously trying to escape from the fight. Morrisons is apparently the only chain amongst the four major British retailers that succeeds in growing, despite the times of crisis...

Questions or comments? Please feel free to contact the editors


Plenty of interest for onerous Abercrombie & Fitch

26/05/2017

Fashion company Abercrombie & Fitch suffered a huge loss once more in the first quarter of 2017. Despite that, the board said there is plenty of interest for a possible acquisition.

Samwer brothers sell half of Zalando shares

26/05/2017

German brothers Samwer have sold almost half of the shares their investment firm, Global Founders, still holds in Zalando. The brothers’ share in the German online fashion retailers is now less than 5 %.

Minor first quarter turnover increase for Foot Locker

23/05/2017

Shoe chain Foot Locker’s first quarter turnover grew 0.7 % to 2 billion dollars (1.8 billion euro), but its net profit did drop from 191 to 180 million dollars (160 million euro).

Uniqlo makes fast fashion even faster

23/05/2017

Japanese Fast Retailing, fashion chain Uniqlo’s parent company, has managed to drastically speed up its production cycle. From now on, it will only take thirteen days to bring a design to the stores.

Patrice Louvet is Ralph Lauren's new CEO

19/05/2017

Fashion label Ralph Lauren has appointed Patrice Louvet as its new CEO. He will succeed Stefan Larsson, who decided to leave the company following a difference of opinion with founder and chairman Ralph Lauren.

Scotch & Soda continues French conquest

18/05/2017

Dutch fashion brand Scotch & Soda will soon open boutiques in Dijon and Paris, to add to its nine boutiques in France.

Back to top