The squeezed supermarket middle

published 16 January 2015

It's been a turbulent week for retailers. Following Tesco's decision to shut 43 shops and cut 1,000 jobs, J Sainsbury plans to trim 500 staff at store support centres. And Wm Morrison has sacked its CEO, Dalton Philips, after five years in the job. The group's profits halved over the past year as sales slid.

Christmas sales were down 3% on last year, an improvement on 2013 but still inferior to rivals' figures. Chairman Andrew Higginson said it was time for a "fresh pair of eyes". His successor "won't be anyone with L-plates in food retail".

What the commentators said

It takes at least six months for customers who don't shop at a store regularly to perceive a price change.

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And it hardly helps that the group's new loyalty card, Match & More supposed to match prices at discounters Aldi and Lidl as well as Morrisons' peers is too complicated. But the bigger problem was that he made "too many mis-steps" before hitting on the right approach.

Philips inherited a supermarket lacking the high-growth segments: convenience stores and an online offering. But his efforts to rectify this were accident-prone, said Andrew Clark in The Times.

He bought an online childrenswear shop to gain digital expertise. It lost a fortune. Then he got Ocado onboard. The upshot is that the group still only makes 15% of sales online.

Morrisons moved upmarket, but "lacked the product range and specialisation to be a hit at the premium end", said The Independent's Chris Blackhurst. It then lost its reputation for low prices as Aldi and Lidl flourished.

Now it is the smallest of the players in the middle of the market grappling with stiff competition at the top and bottom. Will Philips' successor "really be able to do any better?".

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.