I was not the least surprised when it was announced yesterday that Morrisons’ CEO Dalton Philips has been thrown under a speeding bus.
I know, I know…the announcement said he resigned.
But who are they kidding?
Everyone know he was fired.
With sales and profit down and Mr. Philips lacking the appropriate response to Aldi and Lidl assault on Morrisons market share, I knew it was a matter of time before he was fed to the lions.
Ever since October 2014 when he launched his customer loyalty card along with a price-matching scheme that he called a “game-changing” I knew it was the beginning of the end of his reign at Morrisons.
As I said yesterday in response to Tesco’s doomed recovery plan unveiled by its CEO, the big four UK supermarkets could not have come up with a ‘better bad plan’ in response to Aldi and Lidl.
They have all decided to take the typical retailer approach of price war in response to the rise of the Germans.
Not only is price war bad for any business, it is the dumbest approach any business person can take in response to competition.
Only 30-40% of people buy purely on price.
The majority of people buy on value.
It becomes the responsibility of the business to identify what constitutes value to their prospects and customers.
The big four retailers are all of the conviction that their customers are flocking to Aldi and Lidl because of price.
They cannot be more wrong.
If those shopping at Aldi and Lidl were doing so purely on the basis of price, they would have gone to pound shop.
What Aldi and Lidl sell is high quality products made in Germany at reasonable price.
Their customers are buying the high quality ‘made in Germany’.
Secondly, Aldi can afford to sell its products at such ridiculously low price because it has built in efficiency, simplicity and cost saving into its business model.
For a start 90% of the products it sells are its own brands.
Therefore, it has the flexibility of designing it packaging to maximise display space.
Furthermore, the introduction of fresh meat, fruit and vegetable into it product line, increase its appeal to a wider spectrum of customers.
As far as I know, ASDA is the only other supermarket that has it pricing strategy built into its business model.
Mr. Philips failed because he choose to engage in a price war that Morrisons was ill-equipped to fight.
Instead of focusing on price, he should have focused on identifying the value system of his customers and providing them the value.
The other big three supermarkets CEOs are engaging in similar suicidal tendencies. One after the other they will all follow him.
If you are a betting man, rush to the bookies and place your on bet on Sainsbury CEO being the next one in the firing line.
Until retailers understand that price reduction is not a business strategy, they will struggle to figure out how to increase their sales.
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