Asda is most at risk of customer desertion among UK grocers, says GlobalData

Following today’s release of ASDA’s figures for Q1 2022; Amira Freyer-Elgendy, consumer analyst at GlobalData, a leading data and analytics company, offers her view: “The first quarter has been tough on Asda, and it stands to be one of the most affected retailers of downtrading due to its youthful and less affluent target demographic, so the remainder of 2022 will remain a challenge. Its quarterly results (-8.3%) highlight an underperformance  compared to the overall UK Food & Grocery market, which dropped 5.1% over the same period, according to GlobalData’s estimates, causing Asda to lose share to rivals, namely Aldi, Lidl and Tesco. The drop in EBITDA (-£87m) is a trend we will see across all the major grocery players this year, as they prioritise investment in price.

“Younger shoppers are far more likely to trade down via switching retailers, buying less, and switching to cheaper brands than older generations. According to GlobalData’s monthly survey, under 35-year-olds are nearly four times more likely to engage in the budgeting behaviours than those over 65. Asda has a younger audience than other retailers, with only 33.0% of over 65+ year olds claiming to have shopped there in the past year – this compares to Tesco’s (59.6%), Sainsbury’s (57.0%), Morrisons’ (40.3%) and Aldi’s (40.1%) popularity with older generations. 

“To demonstrate that it is listening to customers and responding to the cost-of-living crisis, Asda has made a yearlong commitment to lock prices, which will eat into its margins, but shows foresight. Taking a hit on profits to retain loyalty is Asda’s strategy to avoid shopper desertion. As part of the strategy, it also has introduced its value-driven ‘Just Essentials’ range and invested in its own brand meat and poultry products – all steps to tackle the threat of trading down but delivering a clear message on value and quality will be crucial, as it is not all about price as Aldi and Lidl have proven via their product quality accolades.

“On the other hand, Asda’s younger target demographic has supported a strong online performance, where sales have fallen just 11% versus 22% for the total online grocery market in Q1 2022. Asda’s 18% online penetration is impressive, considering that online sales claimed 12.4% of the UK Food & Grocery market in Q1, so continued investment in capacity, availability and delivery is crucial to protect online shopper loyalty.”