Asda sees change in shopping habits as online offering grows

The Leeds-based group, the UK’s second biggest supermarket after Tesco, said customers are visiting its stores less often as they try to save on petrol costs, but are spending more at the till.

Asda’s finance director Rob McWilliam said: “Shoppers are shopping less but are spending more and a big part of that is fuel prices.

“Customers have less money in their pocket and have responded by being very sensible in their consumption. They are rationing themselves and avoiding stock piling.”

Asda’s latest income tracker showed that families have on average £9 less each week disposable income compared to this time last year, largely due to increased fuel prices.

Asda shopper numbers fell by 1.2 per cent in the three months to the end of June, but this was offset by a 1.7 per cent rise in the average amount spent by shoppers.

The improved spend at the till helped like-for-like sales excluding VAT rise by 0.5 per cent, up from a 0.1 per cent rise in the previous quarter.

With inflation running at over four per cent during the quarter, this suggests that the volume of goods sold by Asda declined in the period.

The 10 per cent online price guarantee is proving very popular with customers and 250,000 shoppers a week are checking Asda’s prices against rivals.

The scheme allows shoppers to use a price comparison website to check their overall spending against competitors.

If Asda is not 10 per cent cheaper than its largest rivals, customers can print out a voucher to recoup the money on future purchases.

“The price guarantee is very effective for us,” said Mr McWilliam. “It is helping us win full basket shoppers. We have one of the strongest price positions we’ve ever had. The guarantee is clearly resonating with customers.”

Three million Asda shoppers have used the price guarantee since its launch in January.

Yesterday Sainsbury’s said it is launching a trial of its own price match scheme, which will match branded groceries with Asda and Tesco at the till, with customers receiving an instant coupon should the Sainsbury’s goods be more expensive.

Asda’s operating income fell after it took on £19m of costs related to its recent acquisition of 147 Netto discount stores as part of its plans to open 250 smaller-format stores.

Asda has converted more than 60 former Netto stores to its banner, with four times as many products as they offered previously.

Asda’s chief executive Andy Clarke said there is no target date to open the 250 stores, but the plan is to open 180 smaller-format stores by the end of the year. In addition to the Netto stores, Asda has acquired a number of other sites from the Co-Op and one-off deals.

“There is definitely a gap in the market,” said Mr Clarke. “People are shopping for a full weekly shop in these stores. This is a working model that we are very confident we can grow up to 250 stores.”

Asda is keen not to describe the stores as convenience as they are all over 5,000 sq ft. The biggest store size is 25,000 as opposed to the average Asda superstore which is 40,000 sq ft.

They also differ from Tesco Metro and Sainsbury’s Local in that they charge the same prices as the Asda superstores. Tesco and Sainsbury’s charge extra in their convenience stores.

The smaller-format stores, which Asda calls “supermarkets” as opposed to its traditional larger “superstores”, will stock up to 10,000 grocery products, around 10 times the amount stocked when some of the stores were owned by Netto.

Mr Clarke said the group’s dotcom service will complement the smaller-format stores, allowing customers to pick up home and leisure or George clothing products from their local store.

On Monday Asda ruled itself out of the bidding for the 800 Iceland store portfolio, saying it is only interested in individual stores if they become available.

Mr Clarke said a lot of the Iceland stores are under 5,000 sq ft, which would be too small for Asda to take on.

Asda lagged sales growth at most of its main rivals in 2010, but has fought back in recent months, boosted by a £100m relaunch of its own-brand groceries under the ‘Chosen by You’ banner.

“The work we’ve done on ‘Chosen by You’ and general product quality improvement is starting to pay dividends,” said Mr McWilliam.

In June Tesco reported a second consecutive fall in quarterly UK sales and missed forecasts, while rival supermarket Sainsbury’s reported a pick-up in sales growth but warned of tough times ahead.

Retailers have struggled as shoppers grapple with higher prices and austerity measures but retail sales grew at their fastest annual pace since April last month, helped by greater discounting.

Mr McWilliam said economic indicators suggest that 2011 will remain a challenging year.

“Undoubtedly, this will be a tough year for our customers. They expect things to get worse,” he added.

Wal-Mart, Asda’s US parent, said group sales rose by 5.5 per cent to £66.5bn in the three months to the end of July. Income from continuing operations rose 5.7 per cent to £2.3bn.

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