It’s going to get tougher for consumers, warn store giants

Andy Clarke, chief executive of Leeds-based Asda, said energy price hikes revealed this week will put more pressure on consumers, already battling high fuel bills and food inflation.

“The savvy shopper absolutely is going to be looking even harder for how they can spend their hard-earned wages,” he said at the British Retail Consortium’s annual conference. “Customers have got less in their pockets than last year, and it’s going to get tighter.”

Tesco’s new chief executive Philip Clarke added he saw a slow recovery, with consumers squeezed by higher bills.

Andy Clarke, who took over at the helm of UK’s second-biggest supermarket a year ago, said growth in April and May had been “net positive” for Asda, although demand was skewed by holidays.

He declined to comment on speculation Asda is preparing a bid for frozen food chain Iceland, although added it would look at buying parcels of stores from other chains that may become available.

A year ago Asda, owned by US retail giant Walmart, bought about 150 stores from discounter Netto. “Our hands are full in terms of merging that,” he said.

Mr Clarke said the Netto stores have accelerated its plan to add more smaller format stores of under 25,000 square foot, where customers can do a full shop but do not pay higher prices. “Last year we said we could get to 100; we’re going to get to 200,” he said.

He added he was pleased with the performance of the group’s relaunched own-brand food range ‘Chosen By You’, which he said was now the UK’s fastest-growing private label brand.

Mr Clarke said he did not recognise surging shop price inflation figures released this week by the BRC, which showed food inflation increased to 4.9 per cent in May from 4.7 per cent in April. “We are significantly below that.”

Philip Clarke, who took over at Tesco from long-standing chief executive Terry Leahy in March, said he saw a slow recovery in the UK.

“May (was) very much quieter for everybody. I think the weather wasn’t so good year-on-year (and) people weren’t thinking about buying big ticket items for the (football) World Cup like they were last year.”

“We still see that pattern of undulation, but slow recovery,” he said, adding shoppers were “very, very hard pressed” by higher petrol prices.

He revealed plans to expand Tesco’s ‘click and collect’ service – where customers shop online and pick up goods in-store – for non-food purchases in 600 UK stores by end of 2011. It will also start selling clothing through ‘click and collect’ from July.

Asda is also ramping up its online offer, and Andy Clarke said by the end of the year it will have 500 stores with ‘click and collect’ capability.

Philip Clarke challenged Tesco, the world’s biggest online grocery retailer, to embrace an era of “new retailing” over the internet.

In his first major speech since taking over at Tesco, he said: “My job is to build on a legacy I have inherited and to do so with the best team in retailing.

“It does not mean sweeping changes; it does not mean a year zero; it does not mean out with the old and in with the new. But there are changes. Change is in our DNA.”

He said Tesco would continue to take its online grocery business into new markets. After launches planned for Prague this year and Warsaw early next year, it will target Bangkok, Bratislava, Budapest, Kuala Lumpur and Shanghai.

Tesco will add features to its online grocery business, such as ‘my usuals’, which predicts which goods a customer usually buys and adds them to their online basket at the click of a button.

“Our big opportunity is to become a multi-channel retailer using our stores to support our online offer,” said Philip Clarke.

He told the conference groups operating both physical and online stores – dubbed ‘bricks and clicks’ – had an advantage over pure online competitors because they can offer customers more delivery options.

“If you can put the two together (internet shopping and stores), you have an advantage, at least for now,” he said. “Our offer online has to be at least as good as, if not better, than that which we offer on the high street.

“We want to be an outstanding online retailer. This is going to be a challenge as the online world is an unforgiving market. The competitor is just a click away.”

‘Celebrate the dominance’

The dominance of big retailers on the high street should not be condemned but celebrated, said the British Retail Consortium (BRC).

Chairman Luke Mayhew told the BRC’s annual symposium that big retailers are often a “catalyst” for growth.

“We should celebrate small and independent shops,” he said.

“But we should also appreciate large and multiple retailers, who often anchor our high streets and bring the footfall so desperately needed.

“They have managed to open new stores, attract investment and create jobs despite the downturn. To regard the success of these large national businesses as in some way sinister is ridiculous.”