Petah Marian

On the move: Challenges lie ahead for new Asda COO McKenna

By Petah Marian | 5 July 2011

Analysts have welcomed the appointment of Judith McKenna as Asdas COO

Analysts have welcomed the appointment of Judith McKenna as Asda's COO

Judith McKenna's rise to COO of Asda has been welcomed by the industry but, with the retailer facing a series of challenges, including declining market shares, the role is set to be a challenging one.

The UK's second-largest retailer announced on Friday (1 July) that Asda veteran McKenna would become COO following the swift departure of Simon King, who left the company after less than a year in the job.

McKenna's broad experience working in FMCG companies, including roles at Calrsberg Tetley and Allied Domecq, before spending 15 years with Asda, means that she is unlikely to face criticism often levelled at finance people moving into retail leadership roles.

Kantar Retail director of retail insights Bryan Roberts thinks it would be unwise to reject McKenna simply as a number cruncher. "While it's true that McKenna's heritage is in finance, she should by no means be dismissed as a bean-counter. Obviously, some finance personnel have made a mess of running retailers but I don't think McKenna will be one of them."

Roberts says that McKenna has a "great understanding of the operational side" and the fact that she is "well-regarded as a people person" makes her an ideal choice for the role.

Indeed, these characteristics were highlighted by Asda president and CEO Andy Clarke when he announced her appointment.

"In the last year alone, her work leading the Netto acquisition and integration programme - which is reinventing our retail future - demonstrates that she's the natural choice for this role," Clarke said. "She also represents someone who lives Asda's culture everyday. Her understanding of our business, her passion for people development, her down-to-earth style and ability to get things done, will all contribute to ensuring she is a great COO."

While the appointment was welcomed, the retailer still faces significant challenges. Neil Saunders, an analyst at Datamonitor's retail arm, Verdict, believes one of the first orders of business for McKenna will be looking at Asda's store proposition - both through segmentation and developing its small-store offer.

Saunders suggests that Asda's offer is very "one-dimensional" because, he says, apart from its Netto and Asda Living outlets, "it offers very similar stores right across the country".

He argues that Asda's competitors are really "flexing their formats" and that the retailer needs to move away from a "one-size-fits-all store policy", tasks that will have wide-ranging implications for the company's systems and operations, for instance, around different ranging and replenishment requirements.

According to Saunders, McKenna will have to "move quickly" to look at stores, particularly if Asda has any ambitions to move into the convenience space. "Small and medium stores are being snapped up and unless they come up with something pretty quickly, they're going to find it very difficult to expand into the market," he says.

McKenna will also take the COO role with the retailer is facing falling market share. Many of its former customers are trading down to hard discounters to save money.

In the most recent Kantar numbers, Aldi and Lidl attained "all-time record shares" of 3.4% and 2.6% respectively, while Asda saw its market share decline to 16.3%, down from 16.7% this time last year.

Saunders suggests that Asda needs to reposition itself beyond price and ensure that it has "resonance for customers in what is a very competitive marketplace".

"It's [price] is not a really strong competitive USP because it only takes someone else who is cheaper than you and you've lost your whole reason for existence," highlights Saunders - who immediately emphasised that Asda is not yet "at that point".

Roberts highlighted that much of Asda's "great work recently" has not had the impact that many expected on driving growth. He said initiatives like the Price Guarantee and Chosen By You own-label range had "pressed the buttons on both affordability and quality" but argued that "market share has not responded accordingly".

Additionally, Roberts adds that Asda's EDLP strategy has lost some of its appeal in what has become a very heavily promotional marketplace.

"One massive challenge facing the business is that EDLP loses some of its appeal in an environment where rival retailers, brands and shoppers are all fanning the fires of promotional escalation," says Roberts.

Sectors: Retail

Companies: Asda, Netto, Aldi, Lidl

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