Retailers must adapt or liable to collapse: Leading UK supermarket boss

Posted by Daniel Palmer on 12th December 2008

Andy Bond, President and CEO of UK-based supermarket Asda, has predicted that the recession will fundamentally change consumer behaviour and that retailers who fail to adapt to the new reality won’t survive.Speaking in London at a seminar organised by Asda and Cebr to discuss the impact of the recession on consumer spending he said that consumers had begun to alter their purchasing habits and believes they are unlikely to return to frivolous spending in the future.

“We can already see how changing attitudes are affecting customers’ shopping habits,” Mr Bond advised. “Consumers are not prepared to pay a premium when they cannot taste the difference. The era of conspicuous consumption is over.”

“Saving money by cutting out waste of all kinds will be the priority,” he noted. “I don’t see this as being a short-term response to the recession but a fundamental shift that will see the emergence of a new breed of customer.”

The new shopper will be more demanding than ever before, according to Mr Bond. “The new emerging consumer will demand more value for money than ever before and genuine price transparency,” he said. “Retailers will have to respond by adapting their business models if they are to survive. Retailers with authentic low cost operating models, who embrace sustainability as a means of reducing costs and who are transparent about how they pass savings on to their customers will be the winners. Those who continue with high/low pricing will become increasingly distrusted.”

Douglas McWilliams, Chief Executive of Cebr reported that economic challenges facing consumers around the world would be around for a number of years. “… the key theme for … households will be increased thrift in the face of rising unemployment, constraints on credit and mountains of debt built up over the last decade,” he said. “So, while disposable incomes will benefit from the collapse in global commodity prices… and interest rate cuts, the stark economic realities we now face will encourage saving not spending.”

With the help of research firm TNS, Asda recently carried out research into the current consumer mindset. Some of the more notable findings are listed below (recent Asda sales figures are listed beside the finding):

* “I don’t need someone to do my food preparation for me” – ready meal sales significantly down, sales of core ingredients up due to 43% of people doing more scratch cooking.

* Simple practical steps to reduce waste are becoming the norm with 69% freezing more things, 40% no longer throwing away leftovers and 31% washing clothes less often

* Customers are also becoming more considered about what they buy with 40% looking for the longest date codes more now when putting products in their shopping basket and 38% buying less perishable food

But customers are still willing to pay extra where they see a real benefit

* “I still need great quality food and drink” – smoked salmon up 17%, champagne up 96%, olives and antipasti up 52%, balsamic vinegar up 70%, olive oil up 19%.

* “I still need ethical standards” – barn eggs down 22%, caged eggs down 5%, free range eggs up 8% demonstrating that ethical products can still sell with a modest price premium, according to the researchers.

Christmas spending may change* 32% indicate they will spend less on stocking fillers

* Customers are cutting back on pre-pared vegetables and doing the food prep themselves, switching to smaller Christmas cakes and standard mince pies and puddings, whilst cutting back on non-essential treats

The realities of the new economic environment and what it means to customers’ lives

* Only brands with significant or perceived product differences, or product categories that provide genuine benefits will continue to prosperThe role of the supermarket?

* When asked who can best help customers through these times, 23% believed supermarkets are well placed to help, second only to ‘me and my family’ (37%) and ahead of friends (17%), high street retailers (12%), government (9%) and banks (4%)