Blackfriar: The Morrisons’ strategy that proved far from convenient

BACK in the 1980s, the cast of the sketch show Not the Nine O’Clock News performed “Nice video (shame about the song)” which was the perfect parody of the pretentious music scene of the time.

Today, “Nice idea (shame about the store locations)” would sum up Morrisons’ move into the convenience market. It’s not a catchy title, but it will certainly strike a chord with many shoppers, and long-suffering shareholders.

Morrisons is reported to be in talks to sell its convenience store estate. If the sale goes ahead, it will be a direct reversal of the decision by former CEO Dalton Philips to enter the smaller store market, which has enjoyed rapid growth in recent years.

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However, the move would certainly be in keeping with the strategy favoured by new CEO David Potts, who is focusing on the core supermarket estate.

The opening of the ‘M Local’ stores under Mr Philips was designed to cash in on the growing popularity of convenience stores.

During the recession, many shoppers decided to start shopping locally.

Rocketing petrol prices also made it a smart move to leave your car on the drive. However, the price of oil has fallen significantly over the past year, making driving affordable once more. While convenience stores remain a growth sector in sales terms, there are doubts about how profitable they are.

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This is particularly the case at Morrisons, which has been heavily criticised for paying over the odds for stores that were in the wrong place.

Earlier this year, Morrisons announced plans to close 23 of its M Local stores with the loss of 300 jobs. Chairman Andy Higginson said a third of the convenience store portfolio had failed.

Morrisons has around 160 convenience stores which generate around £300m in sales a year.

Morrisons’ long overdue entry into the convenience sector was a great idea in principle, but the execution of the strategy left a great deal to be desired.

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Last year, when Mr Philips was still at the helm, Morrisons announced an aggressive expansion of its M Local chain while investing heavily in technology. What a difference a year makes. Mr Philips has gone, after having his strategy denounced as “bull****” at the 2014 AGM by Sir Ken Morrison.

Most of his policies, such as the investment in hi-tech check-out queue monitoring systems, have been scrapped.

Earlier this year, our City Editor Ros Snowdon reported that rivals were saying that Morrisons was so keen to join the race for convenience stores that it took on sites that others wouldn’t touch.

Back in 2011, some might have thought we were witnessing a bright new dawn when Mr Philips opened the chain’s first convenience store in Ilkley, just 14 miles from the company’s Bradford headquarters.

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At the time, Morrisons said it wanted to attract a wealthier audience than those who typically visited its city centre or out-of-town sites.

Other sites chosen for the early M Locals included the upmarket area of Wilmslow in Cheshire, in the heart of ‘Footballers’ Wives’ country.

It’s hard to see how the convenience store format will fit into Mr Potts’ “back to basics” strategy, which has received the blessing of Sir Ken Morrison.

In his first month in the job, Mr Potts culled a third of head office jobs and half the board while creating 5,000 new jobs on the shop floor.

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He wants to win back shoppers who ditched Morrisons in favour of the discounters. His strategy is built around a relentless focus on customer service.

The convenience stores may well join the misting machines among the discarded items of Mr Philips’ troubled reign.

It shows that a great idea is no use without a detailed strategy, based on painstaking market research.

There’s not much point in establishing a store in a place that isn’t going to attract many shoppers.

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