Morrisons has admitted that products sold in M-local convenience stores will be more expensive than in its larger supermarkets.
The Bradford-based grocer did not specify how many products would be cut in its smaller stores, simply stating it would be a “small number.”
The supermarket is pushing into the convenience sector at a rapid pace and is opening two small stores a week. It is aiming to open 100 M-local stores by the end of the year in the UK. By 2016, Sainsbury’s expects to have 1,000 convenience stores, nearly double its present number while convenience giant the Co-operative is planning over 400 new stores in the next three years. Tesco already has more than 1,600 express outlets and is tailoring some of them to the local population.
Danielle Pinnington, MD at Shoppercentric said to focus price cuts on one format felt like a “dated approach.” She said: “Shoppers are less accepting of the premium pricing in c-stores as this format becomes more prevalent.”
Sales have sharply fallen at Morrisons this year while boss Dalton Philips’ strategy was lambasted by ex-chairman Sir Ken Morrison at its annual AGM meeting two weeks ago. The next six months are now vital for the grocer as it hopes its M local stores can offset losses being made by larger stores.
“These are permanent price cuts, not promotions, and they won’t be the last,” said Morrisons chief executive, Dalton Philips.
The latest round of cuts on 135 staple food own-brand and big-brand products will see average prices cut by 14 per cent as it aims to win back customers and appease investors.
Annual inflation on essential items dropped to 1.3 per cent compared to 1.7 per cent last month while the latest inflation figures show food and non-alcoholic drinks prices were 0.6 per cent cheaper in May than a year ago.
Pinnington warned: “In such a competitive market we would caution against a strategy that seems to run counter to the shopper tide – there is nothing worse than disappointing shoppers inadvertently, it generally proves more costly than taking the right action in the first place.”
The cuts did not impress investors as shares fell 0.7 per cent on Monday.