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Cost of Food and Clothes Set to Rise

The British public has spoken, and they’ve narrowly decided that Britain is better off outside of the EU. Already this has led to industry leaders coming out to say that prices are about to shoot up, and this is certainly the case when it comes to both food and clothing. With most supermarkets now selling in both of these areas, this means that your next trip to Sainsbury’s or ASDA might well cost you much more than you were expecting.

There are many reasons why these prices will rise, and it isn’t just a fantasy, dreamt up by bitter Remain supporters. Even Lord Wolfson, one of the Leave campaigns most prominent supporters, has warned that prices will rise. When it’s considered that he’s the man in charge of massive high street chain Next, he clearly knows what he is talking about. If you were to contact Asda, Sainsbury’s or Tesco, they’d almost certainly say the same thing.

Why Will Prices Rise?

Prices will rise for one simple reason: the value of the pound has plummeted, and some estimate that it will eventually lose 20% of its value, as a direct consequence of leaving the European Union. This means that it will essentially cost more money to buy goods from abroad – an extra cost that will have to be passed onto the consumer.

Prices are also set to rise for another couple of reasons. The first is the fact that the National Living Wage is now having a big effect on the bottom line of retailers, who are having to spend more and more money on staff. The businesses aren’t simply going to sit back and absorb the costs themselves though: instead, they are going to pass them on to the consumer, leading to higher prices across the board. The other reason is one more specifically aimed at the retail sector, as people are now choosing to spend their money on things other than clothes, which has led to a drop in sales. When sales drop, prices almost always rise to make up for the lost income.

Cost Increases Likely to Be Delayed

If you don’t see an increase in costs immediately, don’t make the mistake of thinking that the Brexit hasn’t affected them. This is because volatility in the market doesn’t generally affect prices straight away, but instead affects them around a year after the event. The reason for this is the fact that most large retailers have currency hedges, which ensure that they have short-term insurance against currency fluctuations. “Short term” is the key phrase here, as they don’t have any way of stopping price increases in the long term though.

Unfortunately for food lovers though, the price hikes won’t be delayed, as it is predicted that food costs will rise sharply very soon. This will come as a shock to consumers, who have been experiencing falling prices for the last few years. As already explained, this is due to increased costs when importing goods – and the UK really likes to import food. For example, 85% of fruit sold in supermarkets is imported, 45% of vegetables are imported, and large amounts of meat – especially pork – also come from overseas.

Are There Any Economic Benefits?

Of course, the worsening value of the pound will be welcome news for those who export goods from the country, however imports massively outstrip exports in the UK, especially when it comes to the food that we eat. So, increased revenue could help to balance the books slightly, but it won’t be able to completely cover the costs.

In the longer term, it’s really impossible to say how prices will be affected by the Brexit. Many supporters say that it will make free trade with the rest of the world much easier, and allow trading relationships to be built with some of the biggest developing economies in the world. What is almost universally accepted is the fact that the UK can’t become insular and, in effect, pull up the drawbridge to foreign trade. The only way prices will fall again is by building bridges, and engaging with any country willing to trade with the UK.

So, it looks very much like UK consumers are going to be paying increased amounts of money when they visit the supermarket, as a direct result of leaving the European Union. When these prices will start to fall one again is unknown, and will depend heavily on the ability of the next prime minister – whoever it might be – to invigorate the economy.

ASDA Finishes Bottom When It Comes to Customer Service and Availability

If there are two things important to a super market, it’s customer service and product availability. Not managing to meet these requirements could lead to big problems for the supermarket in question, and industry publication The Grocer has just released its latest findings in these areas. A quick flick through the report will have ASDA bosses coming out in hot sweats, as they’ve been hugely criticised in both of the aforementioned areas, finishing at the bottom of the league table for both of them.

The awards by The Grocer are called the “33” awards, as this is the number of items that each mystery shopper buys when evaluating each of the stores. At the moment, the awards only take into account the Big 5 UK supermarkets, namely Tesco, Sainsbury’s, ASDA, Morrisons and Waitrose, meaning that supermarkets such as Aldi and Lidl weren’t tested. The awards come in four different categories, and these are: product availability, prices, the state of stores, and customer service. ASDA managed to therefore come bottom in 50% of the categories.

ASDA’s Poor Availability

The Availability category is important, as it ranks supermarkets on how much stock they actually have available for customers to buy. Scoring poorly in this area means that there are big problems for the supermarket to face, as it shows that they are missing out on huge numbers of potential sales. The winner in this category was Sainsbury’s, who boasted an impressive score of 97.4%, while Tesco and Morrisons came in just slightly behind. Then came Waitrose, before ASDA came in last, with a score of just 93.2%.

ASDA Customer Service Criticised

The Customer Service is category is seen by many as the most important of them all, which will make ASDA’s last-place finish even more embarrassing for managers. In this area, they scored just 63.4%, which was a drop from their previous year’s total – which also hadn’t been too impressive. Once again, it was Sainsbury’s that topped the polls, closely followed by Tesco. Morrisons and Waitrose narrowly managed to come in ahead of ASDA, however their bosses will still be concerned.

The customer service aspect of the survey only took into account the staff members in store, and didn’t look at the way that the supermarkets treated those calling them by phone. So, when you contact ASDA by phone next, will you find the same level of service, or will you find that the staff in their call centre understand customer service a little bit better?

How Will ASDA Turn Things Around?

It seems like ASDA bosses have a huge amount of work to do, as their supermarket is clearly not competing with the other members of the Big 5 at the moment. Perhaps they could take a leaf from Morrisons’ book though? They finished bottom of the customer service table last year, however have now risen to third place. Much of this improvement is down to the fact that they took on 5,000 new staff members, in a bid to improve the overall morale of the Morrisons workforce. It’s also meant that customer have to face shorter queues and find better availability, as there are staff members available to restock the shelves when needed.

More Bad News for ASDA

As if the poor results in The Grocer’s survey weren’t enough, there’s also been more bad news for ASDA this week. This is because they’ve been forced to recall a number of their veggie burgers, due to fears that they could contain pieces of plastic. It affects all ASDA 4 Vegetarian Vegetable Burgers with a best before date of 6th April 2017. While this kind of recall happens quite regularly across all of the major supermarket chains, it has still come at a particularly bad time for ASDA, thanks to the focus currently on them.

But There is Some Good News…

It’s only fair to mention that there’s also some good news for ASDA this week as well though, as one of the wines on sale in their stores has recently been voted as the best in the world at the Decanter World Wine Awards. The bottle in question is La Moneda Reserva Malbec, and it hails from Chile. What’s more, it can be bought in ASDA for less than £5, which means that most should be able to afford to taste a world-beating bottle of red.

So, how will ASDA react in the coming weeks and months, as it tries to reverse its slide and catch up with the UK’s other big supermarket chains? Or will the slide continue, and see ASDA finishing with even poorer results when the next survey from The Grocer comes around?

How Can Asda Combat the Threat from Aldi and Lidl?

It wasn’t long ago that Asda were making huge strides in the UK supermarket race. No longer were they seen as the poor cousin of Tesco and Sainsbury’s, but were instead starting to get on an even keel with them, attracting huge amounts of customers to their stores every day. The main lure for these customers was the low prices, and Asda made a name as being the most affordable supermarket in the country. But then along came Aldi and Lidl, and Asda found that they suddenly lost the ability to crow about their pricing. Instead of being the cheapest, they were now stuck in the middle – not a premium supermarket, but also now not a budget one.

This no-man’s land they found themselves in certainly wasn’t good for business. No USP is a bad thing in the supermarket world. So, Asda need to do something to regain their foothold and stop the downwards spiral. Rebranding and going toe-to-toe with Tesco and Sainsbury’s isn’t an option, so the only thing to do is take on Aldi and Lidl, but is this really possible?

Asda’s biggest plan seems to be to ask its suppliers to start offering them better discounts on their items – discounts that they can then pass on to their customers, while retaining the same profit margins. But will these suppliers really want to drop their prices any lower? If they sell solely to Asda, they could be persuaded, as not doing so would cause them to lose all their business should Asda collapse, however if they sell to multiple suppliers, they might be fine losing Asda’s contract.

Asda will have to be careful while negotiating with suppliers though, as coming in with a big bat and trying to batter down the prices – especially when it comes to smaller companies – could be a PR disaster for them. The last thing they need at the moment is the public to turn against them, at a time when they need to actually be attracting more people to their stores.

Another option being considered by Asda is the trimming down of its ranges. They have already stated that they’ll cut their ranges by around 10%, which will save them money, but will also lead to customers getting a smaller selection of items to purchase. They are working closely with the groceries code adjudicator, Christine Tacon, while they do this, so they don’t fall into the same pitfall as Tesco did, after they were the subject of an inquiry for requesting payments from suppliers to be involved in the review process.

Another option for Asda is to decrease the quality of their products, by using cheaper ingredients and recipes, and also by decreasing the quality of their packaging. Aldi and Lidl haven’t always been known for the highest quality produce, however have flourished by selling it at rock-bottom prices. Could Asda manage to get their prices so low though? Most people seriously doubt it. What’s more, decreasing quality could be a double-edged sword. While it would reduce costs, would it drive people away to Tesco and Sainsbury’s, as they look for better quality food?

Perhaps the most worrying possible casualty of Asda’s demise is the staff though, who represent a massive chunk of the company’s expenditure. Could Asda decide that it needs to make redundancies in order to balance the books, or even shut down some of the poorer-performing stores? If so, it could cause hardship for thousands of people. Once again, this option is a double-edged sword, pitting lower expenditure against a PR disaster. Of course, the company is still advertising for staff though, and many people contact Asda each day about vacancies, so they probably aren’t considering redundancies quite yet.

So, can Asda realistically get out of this hole they’re in? With the backing of the giant Walmart Group, they certainly have the funds and backing needed, however competing on either end of the price scale seems to be a tough ask for the giant supermarket chain. They’ve been in tough situations before though, and have managed to turn things around, so staff, management and owners will be hoping that they can do the same thing again.

It should be noted that, although Asda are suffering the most, things aren’t looking great for Tesco and Morrisons either, both of whom have lost ground in terms of customers. In fact, of the so-called “Big Four” supermarkets, only Sainsbury’s are seeing improving fortunes, perhaps because they are seen as the more upmarket supermarket – and are therefore less affected by the challenge posed by Aldi and Lidl.

So, will Asda be able to turn things around, as they battle against the twin threats of Aldi and Lidl? The next few months could be crucial for this huge supermarket chain, and by the end of the year everyone should have a better idea of how Asda are doing.