Editorial: Morrisons can gain from listening to its customers

With so much speculation over the future of the £30 million Morrisons account, the sound of the starting pistol being fired to begin the race for its business startled no-one. Five successive profits warnings in 15 months, culminating in the first loss in its 107-year history are the outcome of its failure to control costs and the refusal of its septuagenarian chairman, Sir Ken Morrison, to modernise its management structure. At the same time, BDH\TBWA's creative has been workmanlike rather than mould-breaking.

Nevertheless, there are plenty of reasons for agencies to get excited about the Morrisons account despite its recent performance. For one thing, there is the fluid, volatile state of the UK supermarket sector - Sainsbury's has bounced back with a 12 per cent annual profits rise to £267 million, while Adsa, whose Wal-Mart parent had been expected to power it to market leadership, now finds itself squeezed by Tesco from above and Sainsbury's from below. For another, it is becoming increasingly clear Morrisons is emerging from a cathartic period. The painful, expensive process of assimilating Safeway is complete and analysts expect its so-called optimisation plan to deliver better margins.

Above all, Morrisons is well suited to gain from the effect of the sluggish economy on the UK retail sector. Shoppers have been spending less and their eye for a bargain is sharp whether they live in Salford or Sawbridgeworth.

As Sir Ken himself has rightly pointed out, the poor need a bargain while the rich appreciate one. If it can get its act together, Morrisons has an attractive offering - its proposition has always been fresh, quality food at low prices and it has stuck to what it knows, not following rivals into "retail services".

Those who have seen Morrisons from the inside praise the fact it has never lost its canny Yorkshire market-trader mentality and an intuitive feel for what its customers want. The downside is that this has been accompanied by some inhibiting conservatism. It preferred to hire a local agency and did not necessarily appreciate that the demands of shoppers in its northern comfort zone and those in the Home Counties differ. Maybe a London agency (and a few more sunblush tomatoes on the shelves of its Surrey stores) might aid its transformation into a truly national player.

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