UK Asda (Wal-Mart) Overview

Since 1999 Asda has been wholly owned by Wal-Mart the largest company and arguably 'the most ruthless employer' in the world. The takeover should be seen as part of a long process: Asda had been mirroring Wal-Marts strategy for some years before it happened. The takeover has far-reaching consequences for British retail as other companies react to it and find new ways to compete. After years of mutual fancying, Asda was bought or 'became part of the Wal-Mart family' - on 26 July 1999 for $10.8 billion. Since then, Asda claims that it has gained one million new customers. It is converting some stores to Wal-Mart's supercentre format under the ASDA-Wal-Mart banner. The Wal-Mart name first appeared in the UK in July 2000, when the Asda-Wal-Mart super centre opened in Bristol. Asda has been criticised for misleading advertising, using suppliers who are known to have illegal employment practices, ignoring planning regulations and destroying greenbelt land, lack of serious environmental policy and blatant greenwash. With its strategy of consolidation, copied directly from Wal-Mart, Asda pursues an aggressive takeover policy of small towns, wiping out local competition and local jobs. False claims by the company about 'value' and 'convenience', have been challenged, along with the exploitation of every opportunity to push impulse buying.

Market share
Owned by Wal-Mart Stores, the biggest company in the world by value, ASDA is the second biggest supermarket chain in the UK with 17% of the market share. Although it is still a long way off Tesco's almost unassailable 28% market share. Asda operated 259 stores and 19 depots, mainly in Scotland and northern England, and employed 122,000 staff or 'colleagues'. Asda has now overtaken Marks and Spencer as the UK's biggest clothing retailer. Sales in 2006 for Wal-Mart's UK subsidiary, ASDA (which retains the name it had before acquisition by Wal-Mart), accounted for 42.7% of sales of Wal-Mart's international division. In contrast to Wal-Mart's US operations, ASDA was originally and still remains primarily a grocery chain, but with a stronger focus on non-food items than most UK supermarket chains other than Tesco. At the end of 2007, ASDA had 340 stores, some of which are branded ASDA Wal-Mart Supercentres, as well as ASDA Supermarkets, ASDA Living, George High Street and ASDA Essentials stores

Asda has three types of store:

1. Standard, with an average selling space of 42,000 sq ft. 2. Asda-Wal-Mart supercentres, which have been developed/renewed since the merger. 3. Asda Fresh stores which focus on a fresh food range. Sixty percent of Asdas sales are currently in grocery items, although it intends to build on the growth of non-food products in store, which may well change this balance. Asda sells six own-brand labels: Asda Smartprice, Asda, Good for You!, Asda Organic, Asda Extra Special and More for Kids. Non-food is the fastest growing area of supermarket retail, with a 15% year on year growth. . Many stores also have petrol stations; Asda is very proud of the low cost of its petrol. Asda's speciality businesses division includes pharmacies, opticians, jewellery and photo departments. Asda acquired an in-house pharmacy through buying Moss Pharmacies from Alliance UniChem for 100m in 2000. Many Asda stores now have opticians, who provide 'free NHS eye tests for those who are eligible'. In 2002 Asda also started offering flu jabs at lower rates.

Media
Asda started a trial of instore digital TV which will broadcast advertisements from Asda and various suppliers. The trials were taken place in its stores in Wembley and York. Suppliers, each of whom have an exclusive deal on the category they are in, include Nestle, Coca-Cola and Proctor + Gamble. The trial is being run by Market Forward, part of media agency Publicis which manages Asdas media centre. Asda is not alone in this development: Tesco, Sainsbury and Spar have all dabbled. Apparently research has shown that the majority of buying decisions are made instore, and the more channels there are the less effective normal TV advertising becomes. According to one commentator: New ideas like Tesco TV and Asda FM are logical extensions of customer magazines. Procter & Gambles director of customer business development, Gary Coombe, says: Shopper marketing media is becoming more and more important and we do see retailers as the emerging media owners. The reality is that in store environments you have the opportunity to talk to consumers.

Housing
'Supermarkets are planning to make strong moves into the housing market as a response to increasing pressure from local councils for the inclusion of social housing as part of redevelopment schemes.'

Asda, Tesco and Sainsburys are all said to be planning housing schemes including 'affordable' housing in return for planning permission for new stores. Asda has invested 30 million into a 'waterside scheme' in Poole in Dorset, including a 58000 square foot store, 64 social housing flats and 98 'waterside apartments'. In 2002, Asda was awarded the Nestle Social Commitment prize (yes, really), and Asdas own research unsurprisingly shows that 66% of adults consider the Wal-Mart take-over to be a good thing' for the British consumer. The battle against Wal-Mart in U.S. is about maintaining quality community living standards. The true legacy of Wal-Mart isnt lower prices. The true legacy of Wal-Mart is lower living standards for hard working Americans and those overseas. Retailtainment In an effort to head off competitors increasing internet sales, Asda has been working on developing the in-store experience, and has employed trained actors as greeters in some of its stores. It has also run singles nights and been host to an in-store marriage. Asda is also piloting digital screens in some of its stores for companies to advertise their products. The screens will be placed at eye level. The first companies to agree to be part of the pilot scheme include Proctor and Gamble and Coca Cola. The initiative will be run from Asdas media centre and outsourced to its creative agency Publicis. The media centre is a one-stop shop for all Asdas media opportunities. In this initiative Asda is following the example of Spar and Tesco.

Conclusion
Wal-Mart's world-leading status has been built primarily on its dominance of its home market, and the group in fact has very few international operations, with the Mexican (Walmex) and British (Asda) units of any real size and importance. But recent moves into the Brazilian market, where it acquired the majority of Ahold's business, strengthened its hand in Latin America (it is also present in Argentina), and the group is also thought to be one of several looking to expand its Chinese operations following the recent relaxation of investment regulations there. But Europe has traditionally been a weak point in the Wal-Mart chain, notwithstanding the success of Asda, now the UK's second-largest grocer after Tesco. Indeed, the US groups only other European operations are in Germany, where it currently runs around 90 Supercenters. Part of the reason for Wal-Mart's lack of progress in Europe may be down to its particular trading format - although not technically a discounter, the group has always been a value operator, stocking a wide range of both food and non-food items, and this particular combination has never been particularly common in Europe. But no doubt sustain by the success of Asda - a 'best value' retailer performing very successfully in a market which has traditionally been one of the most upmarket in Europe - and by the rising power of the discount sector across the recession-hit Continent, WalMart now appears ready to chance its arm in the wider European arena. The expansion would take the form of both acquisitions and new store developments. But Greenfield expansion into the crowded European market will not be easy, especially with Wal-Mart's large store formats. European planning regulations are already some of the toughest in the world, with restrictions on large store developments in key markets such as the UK, France, Germany and Spain, and acquisitions would certainly seem the most likely option in these countries. In November 2006, Wal-Mart announced a joint venture with Bharti Enterprises to open retail stores in India. As foreign corporations are not allowed to directly enter the retail sector in India, Wal-Mart will operate through franchises and handle the wholesale end. The partnership will involve two joint ventures; Bharti will manage the front end involving opening of retail outlets, while Wal-Mart will take care of the back end, such as cold chains and logistics. Central and Eastern Europe offers perhaps greater opportunity for the US group, not least because these are still very much value-driven markets. Hypermarkets have also been the format of choice for groups such as Carrefour, Tesco and Ahold looking to expand their operations there.

But there are few small supermarket operators left anywhere in Europe which would allow Wal-Mart to dip its toe in the market, and expensing via acquisition is likely to mean a major acquisition. With no large operations there, apart from the UK-only Asda group, Wal-Mart would be unlikely to meet any opposition to a takeover from competition authorities, but just finding a potential partner is likely to be its main problem. Ahold's central and eastern European business would be the most obvious choice, but that seems to be the one part of the Dutch group's business which it will not sell off (having already divested its Latin American and Asian units and put its Spanish arm up for sale). Apart from that, and concentrating on hypermarket operators which fit Wal-Mart's requirements, few other names spring to mind. French groups such as Casino or Auchan are too closely held, while most of Spain's major players (Eroski apart) are French owned and German discounters such as Aldi or Lidl are too powerful.