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The rise and fall of Morrisons and the lessons that could be learnt

Whether you are a multi-national corporation or a small business operating from a box room, financial problems can affect companies of all shapes and sizes. One minute you are flying high with a regular loyal customer base and healthy profits, the next you could be facing sleepless nights due to cashflow problems which, in extreme cases, could lead to bankruptcy, liquidation or administration.

If you have kept up to date with the news you may have read that Morrisons are having a bit of a tough time of it lately. At the beginning of the month they reported yet another period of falling sales and profits, the opposite of Aldi who this morning reported that more and more of us are using their stores.

So how Morrison has got themselves into this pickle? Have there been any mistakes from the big cheeses which we can all learn from? (No more puns, I promise)

You have to remember that Morrisons started selling eggs and butter over one hundred years ago from a Bradford market. It was a family run business with its core values in value and service. It has experienced all the economic ups and downs over the last century and in its most recent years it has spread its popular supermarket chain nationwide.

With a healthy balance sheet behind it, in 2004 Morrisons bought Safeway. This great plan for expansion into Southern England unfortunately led to a costly and difficult merger between the two stores. Not helped in part by the outgoing management at Safeway changing that chain's accounting systems six weeks before the transaction was completed.

Morrisons next mission was to try to attract a more affluent customer, which unfortunately coincided just in time with the financial crisis. This plan didn’t work out well for the supermarket and they received heavy criticism from its customers who accused the chain of neglecting the lower end of the market, which in the past had been its core customer base. Morrisons, like some of the other supermarkets, seem to have been caught out by the rise in popularity of the discounters at a time when most shoppers were beginning to put price first.

More recently, in my opinion, Morrisons missed two key races by a country mile. The late adoption of online shopping which was slightly strange as it seemed to take them an age to catch up, and the slow reaction to the change in consumer shopping habits of people using smaller stores. Morrisons had been known for its superstores but Safeway did have some smaller ‘compact’ stores which as part of the sale were transferred into Morrisons.

Unfortunately, shortly after the acquisition of Safeway, Morrisons sold these stores to Somerfield. In hindsight these stores would have probably be quite useful recently. To play catch up, and with the best locations already in the hands of its rivals, in 2013 Morrisons made the decision to purchase 49 Blockbuster stores from the company’s administrators. The purchase price, and the required shopfitting, was an expensive gamble for the struggling chain and it appears that it hasn’t worked out as well as hoped. Morrisons have this month announced the sale of its 140 M Local stores so that it can go back to concentrating on its core supermarket business….

By following the history of Morrisons you can see in hindsight that some of the decisions taken didn’t work out for the best and they appeared to be slow at times to match the changes in the market and keep up with competition. So are there any fundamental points here which all businesses can learn from the current troubles being experienced by the supermarket? I think that there are four key points:-

  • Move with the times and adopt new technology early - Morrisons introduced online shopping as late as 2013.
  • Have a unique selling point which does not devalue your core brand values.
  • When in a period of transition do not neglect your core customer base.
  • Try to refrain from panic growing - Morrisons decided to invest heavily into the local smaller supermarkets and only after a couple of years decided that it wasn’t working for them……at a loss of £30m!

How does the future look for the chain? The supermarket has said that its customers and colleagues are beginning to notice improvements but they have admitted that the turnaround will take time. The company has introduced a £1bn cost saving programme and with the “leaky bucket” of the local stores now being sold the supermarket is hoping that the future profits will look healthier.

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