Close-Up: Live issue - Can Bendel halt the decline at Asda?

A marketing revamp may not be enough to turn around the store's fortunes, Noel Bussey writes.

Rick Bendel's somewhat shock arrival as the marketing director at Asda comes at a time when the supermarket is in much need of a shot in the arm.

The former chief operating officer of the Publicis network joins Asda as it struggles to come to terms with the changing market landscape and the competition posed by Sainsbury's, Morrison's and the market leader, Tesco.

The figures speak for themselves. In the 2006 financial year, 51.7 per cent of grocery shoppers in the UK regularly shopped at Tesco, while 39.1 per cent shopped at Asda.

More worrying is Asda's balance sheet. In 2006, its revenues grew by just 3.1 per cent, compared with 19.8 per cent the previous year.

Most retail analysts place the blame squarely at Asda's sluggish reaction in waking up to the changing consumer perception of value for money.

The company has classically positioned itself on its cheap prices. However, many of its customers - even price-sensitive ones - have started looking beyond the till receipt at quality and product origin.

"Asda has failed (where Tesco has succeeded) to create and maintain a democratic offering that caters for all walks of life," Russ Lidstone, the chief strategy officer at Euro RSCG, says. "Its premium ranges are weak while its entry-level brands come under increasing scrutiny from discounters such as Lidl and Aldi."

The company has also struggled with a slow store opening policy, an absence of local "convenience" stores and a small online presence.

None of these will be easy to crack. Sainsbury's and Tesco have a massive presence in both the physical and online world and Asda realises that changing the product perception will only go so far if these issues aren't addressed too.

"Today's consumers shop when they are out and don't go out to shop as they did ten years ago. The fact that Asda does not have a significant convenience offering means it is limited in its ability to capture the planned and unplanned 'top-up' market," Lidstone says.

One area where Asda is making faster progress than its competitors is in the non-food market, especially with its George clothing range and Asda Living home furnishings stores. Research carried out by Datamonitor shows Asda's sales of non-food items have increased by 94 per cent over the past five years.

And the supermarket is set to build on this by opening its first new-build standalone George store in Southend next month.

Alastair Lockhart, a senior retail analyst at Verdict Research, says: "Non-food is a core struggle where Asda has a chance of winning. It takes a larger percentage of its sales from this category than Tesco does. The company's ad strategy will be important to any resurgence, but moving into new revenue streams like these will be vital."

As will Bendel's long advertising experience. He has been hands- on with the Asda business for 12 years and will know what well- researched and pitched advertising can do for a retail business.

Advertising isn't the cure-all, though. While Sainsbury's and Marks & Spencer proved that effective advertising can boost a brand, in both cases it was underpinned by a strong product offering, a true sense of brand identity and a strategy that plays to the shop's strengths.

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MARKETING DIRECTOR - Rick Bendel, newly appointed group marketing director, Asda

"The big challenge is online. Tesco has just experienced an online boom and that's something Asda must try to match. Also, Asda is an out-of-town retailer. It has to have a bigger presence alongside Tesco in the high street.

"It's not that Wal-Mart's acquisition of Asda has not been a success. People just misunderstood how it would work. The hype was greater than the reality. Also, US shopping habits are different to those in the UK. You can't just take something that works in Wisconsin and expect it to work in Fulham.

"Asda has to develop as a medium in its own right. As people turn away from advertising, we have to find ways of getting closer to customers."

AGENCY CHIEF - Ian Pearman, managing partner, Abbott Mead Vickers BBDO

"The key question is how someone who has helped build this brand for years and years on the basis of 'Asda price' can begin to work out how it can compete in a world where price is no longer the battleground.

"Bendel needs to work out how to differentiate Asda for quality and health, but none of the communications that Publicis has ever done for the brand shows any aptitude in achieving this.

"Since 'Try something new today', we have tried to change the culture of the customer that we draw in at Sainsbury's. Asda is just happy to sit and let the customers come in, but this is not how the market is going."

RETAIL ANALYST - Alastair Lockhart, senior retail analyst, Verdict Research

"Consumers have changed dramatically over the past five to ten years. A supermarket's offer is now no longer about price, but value. Tesco always offers value, whether premium or discount offers. This extends its consumer base. Asda is only just beginning to do this and therefore its customer base is narrower.

"Advertising is a key means of helping it rectify this problem. Look at its most recent campaigns, particularly the stuff for George - there's no doubt that this is becoming more aspirational.

"However, realistically, I just don't think it's feasible to think that it can take on Tesco. Just look at its market share compared with the rest of the major players."

AGENCY CHIEF - Paul Hammersley, chief executive, The Red Brick Road

"Asda's issue is getting beyond its price positioning. That's its strength and its weakness. It is known for its prices and little else.

"There is a genuine shift in attitudes and behaviour towards a concern for, and interest in, quality. Food quality and better eating are a major part of Sainsbury's and Marks & Spencer's recovery and a significant part of Tesco's leadership. Asda has been left behind here in terms of its offer and its image. The former may be easier to fix than the latter.

"I'm not sure that Asda can plausibly chase after a quality proposition and at the same time not lose touch with its value heartland."