What's in store for Morrisons?
Following a very uncertain 2015, Morrisons has made its exit out of London’s FTSE 100 index following a sharp decrease in its share price. Below, is a summary of the tumbling share price Morrisons has experienced from October to December which follows the general pattern through this year.
The final quarter of this year has been far from easy for Morrisons, following price cuts, falling sales and facing increasing competition from the likes of Aldi and Lidl. Following a strategic retrenching strategy, Morrisons announced it was selling 140 loss-making “M” local convenience stores, in an attempt to focus on larger sites. Morrisons struggles can be attributed to a number of factors.
Firstly, Morrisons has attempted to re-position itself in the market, trying to focus towards customers ‘on a budget’. Unfortunately, this pricing policy has failed and whilst it has been able to take on rivals in terms of quality, it has not been able to undercut prices set by heavy discounters efficiently enough. In March, Morrisons reported a 52% drop in annual profits to £345m, its worst results in eight years. A consequence of the supermarket price wars being waged by Morrisons and its competitors has been the financial squeeze that has been exerted on suppliers.
Nowadays, one of the most highly sought out services by consumers, is online offering due to ease and convenience. Retailers such as Tesco have enjoyed successes since launching its first online campaign in 1999 – it is no wonder more than 27 million people outside the UK, hold a Tesco Club card. Only in 2013, did Morrisons launch its online fresh food offering leaving it 14 years behind Tesco in this sector. With the majority of retailers offering online services, the market is expected to grow to approximately £15bn by 2018 and with Morrisons being so late, they have lost significant custom to the likes of Tesco.
Poor customer service has been an increasingly concerning issue amongst many branches of Morrisons stores. Morrisons, like Tesco has struggled to achieve satisfaction amongst shoppers. Examples of poor customer service include not enough till operators and poor staff engagement, both which detract from the overall customer shopping experience. Consumer experience is an important factor retailers should consider, and what the consequences will be on repeat custom, should a customer have a bad experience - we can relate to such experiences within our team. These are issues CEO David Potts aim to address in his turnaround strategy. The reinvestment programme is believed to improve availability of products at peak times and shorter queue times which will increase customer satisfaction levels.
The outlook for Morrisons is somewhat bleak. With the Christmas season approaching, sales may see an increase, however in the long term there are a number of struggles Morrisons will face, some of which are mentioned above. Morrison CEO, David Potts claims that Morrison’s fall is ‘short-term’ and insists his turnaround strategy for the UK’s fourth biggest supermarket is making “good progress”. Since joining Morrisons, David Potts has cut 720 head office jobs as well as 45 positions in the supermarkets leadership team. With a falling share price, diminishing profits and reducing market share, uncertainty lies in the future of Morrisons and with current performance there is speculations that a merger or acquisition may be a strong possibility.
Watch this space…