Martin Ackroyd: Morrisons failing to learn lessons of a successful past

Morrisons has been losing sales to rivals
Morrisons has been losing sales to rivals
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I WAS fortunate enough to have been appointed to the main board of Morrisons in 1987 and I am proud to say that I was part of the team that delivered rising sales and profits for each of the 32 years I was involved with the supermarket.

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This led from turnover of £35m in the year to January 1975 to £4.96bn some 29 years later (the year before the Safeway takeover) with profits rising from £1.4m to £320m in the same period. Shareholders benefitted from a rising share price which doubled on average every three years.

Not once did we feel the need to copy Tesco, Sainsbury’s or Asda (all three of whom were considerably larger than us) whom we respected but never feared.

We certainly didn’t have any concerns about the plethora of small supermarket operators epitomised by Somerfield, Presto, Fine Fare, Norman’s, Lo Cost, Wm Low, Co-op and Jacksons etc. Nor did we panic when Aldi, Lidl and Netto joined them in the mid 1990s.

Morrisons continued to concentrate on “their” business of aiming to operate the best superstores rather than trying to become the biggest food retailer.

We always believed that head office was an overhead, a necessary evil with only one purpose – to serve the stores. We later realised that many of our competitors feel that the stores are there to fund the head office.

This meant that each of the directors was directly responsible for their own department. Not only were we in charge of the overview but were expected to be part of the team and on first name terms with everyone in the department.

My office was in the middle of the accounts section, Roger Owen was within the estates department, Marie Melnyk and Bob Stott amongst the buyers, John Dowd in personnel and David Hutchinson in one of the factories. Mark Gunter had the responsibility of maintaining standards in the 150 or so stores so was a bit more flexible in his whereabouts.

Board meetings were held once or twice a month and strategy, new sites, instructions and, in particular detail, any problems that had arisen since the last meeting were discussed Sometimes these board meetings were held on a bus so we could visit a number of sites that Roger wanted us to consider making an offer for. They were always lively affairs with fallouts and accusations flying but we always left all arguments in the board room (or on the bus) and presented a united front on the outside in order to pursue the decisions that we had settled on.

Keeping costs to a minimum meant that, despite offering our customers extremely competitive prices with unbeatable in-store offers, the stores were always well maintained, fully stocked and welcoming.

The biggest crime a retailer can commit is to be “out of stock” of an item that a customer has a reasonable expectation of being available. Store managers had this drilled into them and if a product was running short, or had been missed off a delivery, it was his responsibility to get hold of the distribution manager to ensure the shortfall was rectified.

When Tesco launched its loyalty card, we considered the implications and dismissed it as being akin to the old Co-op divi – asking customers to pay over the odds today in order to be “awarded” with vouchers at a later stage.

The same can be said for home delivery and smaller shops – discussed in great detail but eventually dismissed. Small stores because we had been there and then spent our careers building bigger and better stores and home delivery because the costs are horrendous and can only be fully recouped by subsidy from the superstore network, penalising the in-store customer.

Although the four major superstore operators all now have small shops and all now have an on-line presence, it is noteworthy that not one of them have closed or threatened to close (apart from relocations) any of their large stores.

It is a crying shame that the current chief executive Dalton Phillips and his large posse of non-executive directors (another cost we knew we could do without) do not recognise that falling sales and collapsing profits are not the fault of the previous management failing to recognise the challenges of the 21st century but his board’s failure to carry on the 20th century philosophy of being the lowest cost operator in fully stocked large superstores.

• Martin Ackroyd is a former finance director of Morrisons